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Business Plan of Living Workshop In Taipei (Taiwan) Essay

Introduction:

Living Workshop is an emerging corporate house with start-up business in the ever-broadening market of home merchandise. We sell excellent products of home furnishing and related field, which boast of international standards. Mr. Eric Wang is the owner of Living Workshop and Mr. Christian Lee heads its operations.

To maintain our company, operation plans are to include the following strategies:

To generate external funding
To expend more store locations
To create financial strategy segment that controls cash trend

The Business:

Living Workshop has expertise in managing a massive diversification of quality products in the domain of home merchandise with equal weight on efficiency and customer service. The range of products is conveniently made available at one place giving consumers’ interests the foremost priority. There are in total four main divisions of our business which re enumerated below in a detailed format:-

Bedding: – sheets, pillows, shams, comforters, mattress pads, ensembles, dust ruffles, blankets/throws, bedspreads, futon covers, bedding accessories.

Bath: – towels, towel warmers, bathing ensembles, caddies, curtains, curtain rods, shower heads, tub accessories, shelving, bathroom furniture, hardware, bathing rugs, cabinets, shelving, mirrors/hampers, kids bathing range.

Furniture: – seating, accent furniture, tables, furniture for office, media, wine storage equipments, storage furniture, furniture for the kids, kitchen carts, luggage, headboards/beds.

Home Decoration:

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– food preparation gadgets, cutting boards, baking wares, sink wares, spice racks, kitchen textiles, kitchen rugs, water filtration equipments, cookbooks.

Mission:

Living Workshop relentlessly works on helping our dear customers experience the best quality of lifestyles by providing premiere home décor items and a whole range of excellent household commodities conceptualized by the best designers and developed by the best craftsmen. We are always concerned about customer satisfaction and every moment ready to deliver with the best possible solutions to the needs and queries of our customers whom we consider the most precious assets of our company.

Goals
The company of Living Workshop has certain specific and general goals to establish itself as a premier enterprise in the sector of world-class home merchandise products, which are enumerated below –

To serve the customers by providing them with a whole range of options for home furnishing products of international standards.
To continuously strive for developing newer and diversifying the range of products.
To sincerely ensure the qualitative aspects and element of responsiveness of customer services.
To provide a healthy environment for the employees to work and prosper.
To whole-heartedly ensure the long-term sustainable growth of the company’s business in order to stress on the interests of the stakeholders.

The Business Pyramid:

Good Management Practices

Corporate Responsibility & Excellence

EXPECTED

(Ought to)

ESSENTIAL

(Must)

DESIRED

(Can)

The corporate family of the Living Workshop whole-heartedly believes in the above structure of business pyramid. It maintains that thinking and applying within the intangible framework of the above pyramid is compulsory for developing a good business, and sustaining it in the long run with stability in all spheres of functions, keeping both the customers and employees satisfied and happy (Beckwith, n.d. pg 1-2). The broad segment at the base of the pyramid signifies certain regulations for the employees, which are very essential to understand and follow sincerely. The employees will be abiding themselves to the basic laws of the company, keeping individual interests behind, and help the fellow workers to create and maintain a healthy environment to work. They need to aim for practicing environment friendly technological expertise, and toil to succeed in the arena of research and development, which will resultantly help the company to confidently take profitable strategic decisions.

Taiwan:

Taiwan is the official name of the Republic of China (R.O.C.). It is situated in the East Asian premises off the coastal strips of China. Its location is southwest of the principle isles of Japan and north-northwest of the Philippines. The oceanic island nation of Taiwan is 245 miles long and 89 miles wide (Taiwan Geography, 2005). Taiwan consists of steep mountains and major parts of the country are covered by vegetation of tropical and subtropical kind (World Factbook, Taiwan, 2000). Its climate is marine tropical in general. Natural hazards like typhoons and earthquakes are prevalent in the country. Taiwan’s total population near the end of 2008 was 23,016,257 (The China Post, 2008).

The economy of Taiwan is totally capitalist in framework (NationMaster, Taiwan Economy, 2009). It is chiefly led by the exports of high-end goods and services (Asia Newscast, 2009). The major technologies of Taiwan are centered on bicycle manufacturing, laptops, semiconductor device fabrication and biotechnology.

Source: Schive, 2007; TAIWAN ECONOMIC FORUM, 2007, p. 8

The above diagram is a graphical representation of annual gross investment as a percentage of gross national product (GNP) in Taiwan’s economy. It reveals change in the amount of gross investment from the year 1997 to 2007. Gross investment comprises of both public and private investment. A notable aspect in this regard is an almost steady rate of growth in gross investment in Taiwan in the particular three-year period between 2005 and 2007. There has been a constant rate of growth of about 20% in the total amount of resources invested as a percentage of GNP (Index Mundi, 2008). This indicates promising signals for business and commerce to flourish, as the environment of market economy is compatible and in a prominent growth path. The Living Workshop will explore this fact further and accordingly organize its investment plans in the future to expand its business in other parts of Taiwan. For future endeavors, the Living Workshop has Kaohsiung City and Hsinchu in the radar.

Source: Lan, 2008, p. 7

In order to understand the economy of Taiwan in more depth, it is imperative to assess the data about per capita GNP of the country. The diagram given in the previous page is a graphical representation of total amount of per capita GNP of Taiwan (at current prices) in US $. It shows the approximate amount of the Taiwanese per capita GNP in the period between the year 1997 and 2007. In a four year period between 2004 and 2007, as revealed by the graph, Taiwan’s per capita GNP has increased from an approximate level of US $16,000 to US $18,000, which is a rise of an enviable 12.5%. The annual inflation rate in Taiwan in the fiscal 2007-2008 was in between 1.5% and 2% (Economist, Taiwan Economic Data, 2009), i.e., on the lower side. A definite economic interpretation can be drawn from this situation that the purchasing power of the Taiwanese people who are earning is on the rise, as whole, considering the indicative data of per capita GNP and the inflation rate.

The Competitors of Living Workshop:

After analyzing the market for home furnishing products in Taipei, it has been seen observed that, as said before, there are two separate segments of companies, which will compete with the Living Workshop in this field.

            Analyzing IKEA – First of all, it is crucial to dissect the business of IKEA; the Sweden based International Corporation in the sphere of home furnishing products. It has got 4 shops in the city of Taipei and one warehouse. It is very dominant in the European market of home furnishing products, with a total market share of a massive 76%. But in the context of the Asian market, only 6% of its total sales were generated from the region (IKEA, 2006). The Taipei City market is obviously an even more miniscule source for IKEA for the generation of sales revenue.  The other two corporate houses in the business of home furnishing products, MUJI and Working House are not so effective like the IKEA, though does a considerable business in the Taiwanese market, especially in Taipei.

SWOT analysis:

            STRENGTHS

(Thompson, Strickland &

Gamble, 2007)
Strict maintenance of the value system and giving the utmost priority to the customers’ needs as per the international standards.
Conveniently provides a whole range of quality home furnishing under one roof.
Targets customers of every age.
The home furnishing products will be competitively priced.
Original product designing concepts are used.
WEAKNESSES
New entrant in the Taiwanese market of home merchandise.
Prevalence of the factor of a considerable time lag in incurring the initial costs of setting up business in home merchandise.
Presence of the element of unawareness regarding the brand name of the Living Workshop.
It is not yet proved that consumers are going to prefer the products of the Living Workshop over those of its rivals.
OPPORTUNITIES
Finding potential and taking advantages of the ever expanding           market for home furnishing commodities in Taiwan.
Scopes for putting focus on the diversification of home merchandise products.
THREATS
Prevalence of numerous experienced competitors in the sector of home merchandise products in Taipei City. This can reduce the profit margins. Moreover, the rival companies can steal the business ideas and concepts of the Living Workshop.
Taiwan is prone to natural disaster and unfortunately Taipei city is not barred from this radar. Location of Taiwan is in the subtropical zone, as well as in the seismic belt. Strong typhoons or catastrophic earthquakes could damage the prospects of logistics, hence business.

Internal Environment

Organizational Structure: –

Chief Executive Officer

(CEO)

This tree-structure defines the company’s executive arrangements while penetrating the market. The network shown above provides the functions and the responsibilities of the different wings in a hierarchical approach. Here the stated five most important departments like the Departments of Finance, Human Resource, Marketing, R&D and Technical Support and finally the Operations are supposed to report to the CEO of the company about the regular updates and the advancements in each of their respective fields. The business structure as planned by the CEO and the top management require these information to pave their way through and advance towards the expansionary motive of the company. The Operations Department, as shown above, should be directly in contact with the three stores, which are to be launched, responsible for the supervision of the same, gathering the facts and providing them to the CEO.

Structural Overview: –

The functionary and the responsibility composition of the various departments can be presented in a definite structured format, which should be followed to ensure the perfect understanding of the duties imparted to each of the mentioned departments. The format is shaped in a way as given below:

Operations: –

The information regarding the types of the stores and the costs associated with the space rentals and wages are needed for adopting apt policy-decisions in ascertaining the locations and cost-effective zones in establishing the stores. There can be two kinds of locations where these stores can be set up—Traditional and Non-traditional. The traditional location can be defined as a business premise or a store with a substantial or significant size (say for an example a store build up on 10000-15000 sq. feet land area) and designed in such a way so that by appearance it will be able to attract maximum population judging their tastes. The critical features to be incorporated in the designing part are the consumers’ choices, unique characteristics of the products satisfying the demands of the potential consumers etc. This requires extensive research, proper exposure and efficient publicizing of the commodities that the company markets along with the choice of proper locations pulling in maximum volume of crowd. Therefore the best-suited locations should be major urban centers or some strip mall centers belonging to the sub-urban regions. Again the Non-traditional business premises can be considered as a store which runs its business by remaining under or by combining itself with some other primary business house, or may be within some institutional establishments like schools, colleges, universities, supermarkets, shopping malls, airports etc. (“Item 1. Business: Background of Jamba, Inc.”, 2007). The benefits associated with these setups are that there generally exists a definite quantity of crowd in the mentioned spots, which normally does not diminish, and so there is very little chance of decrease in the number of store visits.

Timeline:-

By the timeline the company will set up a tentative target date in respect of when to open up the store by gradual steps undertaken from a few days before the actual inauguration of the store, and should try to abide by that.

Achievement Time
Activity
Resposibility

(Dept. Wise)
Should get completed by June 2nd, 2012.
1.        The establishment of Living Workshop, Taiwan.

2.        Collection of Capital.

3.        The government registration process.
1.        CEO and the top management.

2.        The Department of Finance.

Should get completed by July 10th, 2012.
Recruitment process for the operational positions such as the Duty Manager and the Part-time employees.
1.        CEO and the top management.

2.        Human Resource Department.

Should get completed by August 1st, 2012.
The training programs in the fields of Operations and Technical processes.
Communication and learning of company’s cultures and values.

1.              Human Resource Department.

2.              R&D and Technical Support.

Should get completed by August 18th, 2012.
The initial setup of the Living Workshop store.
Installations of all the equipments.
Operation of the in-store equipments by the store staffs.
Operations Department
R&D and Technical Support.

Should get completed by August 25th, 2012.
The commencement of the promotional activities.
Posting of advertisements in 7-eleven stores and in the major search engines.
1.        The Department of Marketing.

2.        Operations Department.

Should get completed by August 31st, 2012.
1.        Probational operation—from August 26th to 31st, unofficial opening of the store.

2.        Ground should be kept open in September.
Operations Department.
The Department of Marketing.

Ground open on September 1st, 2012.
The first Living Workshop Store ground open in Taipei City, Taiwan.
Every departments and Partners.

Marketing:-

Focusing on the company’s valuable product range and communicating with the customers through proper building up of its brand image should follow the marketing strategy. The plan must and should be constructed in such a way so that with expertise and skilled manipulation of the company’s core values and brand image, there can be penetration in the market. This will depend upon some major factors like the consumer behavior, the geographic and the cultural basis of the territory. In Taiwan, the market is fragmented, and so there is equal opportunity for all the companies who are rivals and selling homogeneous products. “Fragmented industry environments are usually ideal for focus on a well-defined market niche” (Thompson, Strickland, and Gamble, 2007, p. 247). There are many strategies that can be undertaken depending upon the market condition like focusing on a particular geographic area, becoming a low-cost operator, specializing on a particular product or customer type etc. The last two policies can’t be adopted as the company is trying to expand and spread into people belonging to every age group analyzing their tastes and meeting the demands.

Motivation, Call to Action

Ongoing Value Perception Communication

Compelling Offer, Value, Continuity

Spend/Usage

Financing & Financial Operations:-

The main characterizing feature of this department is to provide the financial reports to the top management after conducting extensive financial analyses. It should assume the responsibility regarding the tax affairs, pay roll, and the accounts, which are receivable and payable. All the accounts reconciliations are prepared and reviewed along with the cash flow and this department manages financial budgeting. There is huge lot of tangible and intangible real assets of the enterprise, which need to be transacted with expertise. The dealings are mainly based on these financial securities, which includes capital goods like machineries, shares, bonds and varieties of other specialized securities. The cash generated by these assets and the loans that can be acquired by the company by selling these assets are matters of genuine management and the Financial Manager of the company who is also the chief of the Department of Finance assumes operations concerning these managements.

So the Financial Manager undertakes the significant decisions regarding the financial and investment policies. The actual functional structure of the financial body can be shown with the help of a diagram as given below:

The sales forecasting is done based on the initial capital investment of 4 million US$. A simplistic approach has chosen in predicting the sales revenue earned by Living Workshop. The target is to reach the breakeven level of initial investment by the third fiscal year at most. The growth rate as can be seen from this diagram, from the 1st to the 2nd fiscal experienced 50% and from the 2nd to the 3rd witnessed 66.67% of rise in the revenue earnings. So at the end of the 3rd fiscal, the company is reaching its target of breakeven level of sales.

Year
2013
2014
2015
Revenue
0.8
1.2
2.0
Fixed Cost (Rent, Wage, etc.)
0.4
0.4
0.4
Variable Cost (Advertising, Incentives, etc.)
0.25
0.3
0.4
Net Income
0.15
0.5
1.2
Start-of-year Book value
4.0
3.6
3.2
Book Rate of Return
3.75%
13.89%
37.5%

The above table shows a possible structure of the Income Statement of the company. The unit considered here is million US$.

PERIOD ENDING
01-Sep-2013
01-Sep-2014
01-Sep-2015
Total Revenue

Cost of Revenue
800,000

381,700
1,200,000

590,100
2,000,000

958,300
Gross Profit
418,300
609,900
1,041,700
Operating Expenses:

Research Development

Selling General and Administrative

Non Recurring

Others

Total Operating Expenses

283,200

459,900

883,800


Operating Income or Loss
135,100
150,000
157,900
Income from Continuing Operations:

Total Other Income/Expenses Net

Earnings Before Interest And Taxes

Interest Expense

Income Before Tax

Income Tax Expense

Minority Interest

4,900

227,900

14,400

214,400

68,400

28,300

755,600

54,300

711,300

227,600

45,900

1,705,500

145,400

1,596,000

406,000


Net Income From Continuing Operations
150,000
500,000
1,200,000
Non-recurring Events:

Discontinued Operations

Extraordinary Items

Effect Of Accounting Changes

Other Items


Net Income

Preferred Stock And Other Adjustments
150,000


500,000


1,200,000


Net Income Applicable To Common Shares
$150,000
$500,000
$1,200,000
The table below shows a possible structure of the Income Statement of the company. All units are in US$.

      The Cash Flow statement is given below as it should be reflected during the subsequent years of launching of the Company (all figures are in US$)

PERIOD ENDING
01-Sep-2013
01-Sep-2014
01-Sep-2015
Net Income
150,000
500,000
1,200,000
Operating Activities, Cash Flows Provided By or Used In:

Depreciation

Adjustment to Net Income

Changes In Accounts Receivables

Changes In Liabilities

Changes In Inventories

Changes In Other Operating Activities

45,700

8,200

(9,100)

4,000

6,600

(8,600)

151,500

44,600

(35,300)

(13,200)

(18,800)

21,000

314,900

176,000

42,900

13,400

(104,300)

(70,800)
Total Cash Flow From Operating Activities
196,800
649,800
1,572,100
Investing Activities, Cash Flows Provided By or Used In:

Capital Expenditures

Investments

Other Cash Flows from Investing Activities

(38,300)

600

(6,800)

(368,300)

121,100

145,300

(142,900)

32,600

(10,100)
Total Cash Flows From Investing Activities
(44,500)
(101,900)
(120,400)
Financing Activities, Cash Flows Provided By or Used In:

Dividends Paid

Sale Purchase of Stock

Net Borrowings

Other Cash Flows from Financing Activities

(68,800)

(289,400)

161,300

(215,200)

(210,300)

(218,800)

(467,900)

(82,300)

(283,300)


Total Cash Flows From Financing Activities
(519,500)
(644,300)
(833,500)
Effect Of Exchange Rate Changes
10,700
9,700
17,300
Change In Cash and Cash Equivalents
($ 356,500)
($ 86,700)
($ 635,500)
The Balance Sheet can be provided in a similar manner. It is given as below:

PERIOD ENDING
01-Sep-2013
01-Sep-2014
01-Sep-2015
ASSETS: Current Assets

Cash and Cash Equivalents

Short Term Investments

Net Receivables

Inventory

Other Currents Assets

115,800

19,600

126,900

108,900

49,700

259,400

9,800

404,900

330,100

159,600

329,700

22,700

873,200

837,200

376,600
Total Current Assets
420,900
1,163,800
2,394,400
Long Term Investments

Property Plant and Equipment

Goodwill

Intangible Assets

Accumulated Amortization

Other Assets

Deferred Long Term Assets Charges

337,600

994,900

606,400

64,200


946,700

2,739,300

1,630,200

206,600


2,035,300

5,859,900

3,348,500

472,600


Total Assets
2,424,000
6,686,600
14,110,700
LIABILITIES: Current Liabilities

Accounts Payable

Short/Current Long Term Debt

Other Current Liabilities

311,000

36,800

660,200

582,500

244,300

792,900

1,303,600

982,900
Total Current Liabilities
347,800
1,487,000
3,079,400
Long Term Debt

Other Liabilities

Deferred Long Term Liability Charges

Minority Interest

Negative Goodwill
627,100

77,900

215,100


1,134,700

249,200

581,700


2,352,500

811,600

1,174,400


Total Liabilities
1,267,900
3,452,600
7,417,900
STOCKHOLDERS’ EQUITY:

Misc. Stocks Options Warrants

Redeemable Preferred Stock

Preferred Stock

Common Stock

Retained Earnings

Treasury Stock

Capital Surplus

Other Stockholder Equity

25,100

68,700

617,400

(593,800)

1,006,100

(31,200)

67,900

193,000

2,030,300

(1,876,900)

2,856,800

(33,400)

135,800

397,800

4,898,000

(4,730,300)

6,005,400

240,600
Total Stockholder Equity
1,092,300
3,237,700
6,947,300
Net Tangible Assets
($ 445,200)
($ 1,135,500)
($ 2,515,600)
Here we see that the goodwill of the company is gradually taking a steep hike more than doubling itself from the 2nd to the 3rd fiscal year. That means the reputation of the company is getting built up and we can see from the Total Stockholders Equity trend that the investment is also high with a similar trend of acquiring an increasing rate of growth. But with that the total liability level is also getting increased which should be controlled, as because even if there is a high level of return, there is also a high risk associated with it. So there is no problem in reaching the breakeven target by the 3rd fiscal but the liability will surely be a matter of concern.

References

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