A Business Development Plan
On
Submitted To:
Mr Ashish Tiwari
Mr Bibek Risal
Mr Rabindra Silwal
Ace Institute of Management
(Graduate School)
Submitted by:
Prajeena Shrestha
MBAe Fall 2012 Batch
05th March 2014
Acknowledgement
I am very much delighted to prepare this Business Development Plan on Hamro Kheluna.
It has been a great learning experience to prepare this report which is the partial
requirement for the degree of Master of Business Administration (MBA) of Pokhara
University.
The Fundamental Purpose of this requirement is to prepare us to be the best entrepreneur.
This effort has definitely guided me to purse my career in entrepreneur. This effort has
definitely guided me to purse my career in entrepreneurship to this large extent. I express
my sincere gratitude to the subject facilitator Mr Ashish Tiwari,Mr Bibek Risal &
Rabindra Silwal for their valuable guidance and support in preparing this report. This has
widened our knowledge and helped us to be practically exposed. I am very grateful to all
the people and organization, which have provided me, related data and information
necessary for the successful completion of the plan.
Similarly, I am thankful to all my friends and family who have given me suggestions to
make my plan better and worthy. Their help and support has proved to be a milestone in
this writing.
ii
Executive Summary
Hamro Khelauna is a toy manufacturing company which is first of its kind in Nepal. Beside
few household toys manufacturer, this type of industry actually does not exist in Nepal.
Hamro Khelauna is established with the innovative ideas of manufacturing and supplying
toys in commercial segment. Its product lines are toys of wooden materials. All toys are
handmade products with care and love. Similarly, raw-materials and color used while
manufacturing toys are natural or eco-friendly to ensure that the toys does not harms a
children from any aspects .Our handcrafted toys are also designed to nurture creative play
of children and made to last for lifetime.
Hamro Khelauna has a diversified range of wooden products across various categories like
cars, animal set, puzzle, blocks and counting ambus. Our product are more than just
traditional playing with toys, but even specially designed to encourage the spirit of fun as
well as learning environment. Our product also focuses on safety, quality and health
measures meeting quality requirements. The traditional knowledge, skills and capabilities
of our craftspeople engaged in the manufacture of innovative toys. Hamro Khelauna core
competence will be manufacturing quality toys without using any harmful materials
.Increasing awareness and quality consciousness of consumer gives more scope of Hamro
Khelauna products in the market.
The company will be started by two partner 50% each of the total Rs 37, 80,500/- capital
reuired.100% equity will be investment as we will not use loan. The forecast sales revenue
for the first year will be Rs 6,909,000 and will be increase to in the fifth year. To achieve
this goal, we will be applying extensive marketing and making competitors’ weakness our
strength. We have no doubt that the profit for the first year will be Rs 1,64,148/- and will be
increase to Rs 8,38,521 /-. Hamro Khelauna plans to expand its chain in different parts of
Nepal and major cities like Pokhara, Chitwan and Dharan. Manufacturing new products
like clothes, shoes, goodies and accessories for children and supplying our products to
primary school. It is essential to promote a completely new brand in market. Our
promotional strategy will be creating awareness in general people about harmful toys
and chances of risks. The medium of promotion will be banner, Broachers and sales
iii
representative. Sales representative will make contacts with interested toys traders in
the market. Besides from these efforts e-commerce is also a promotional tool for
marketing of this product. So we will do online selling also in order to promote our
product.
From the marketing analysis, operation plan and financial analysis we can see that Hamro
Khelauna has a good chance of being success in the business. However there are tough
competition in the market and we also have to think about alternative plans. In this
condition we can give it as lease to other toys manufacturing business or we might sell the
overall firm to others. The amount receives from the sale of the firm will help to minimize
the loss.
iv
Table of Content
Acknowledgement.................................................................................................................. ii
Executive Summary .............................................................................................................. iii
Table of Content ..................................................................................................................... v
List of Tables....................................................................................................................... viii
List of Figures ....................................................................................................................... ix
1.
Company Background .................................................................................................... 1
1.1 Company Overview: ..................................................................................................... 1
1.2 Mission: ........................................................................................................................ 2
1.3 Vision: .......................................................................................................................... 2
1.4 Goals & Objective: ....................................................................................................... 2
1.5 Values: .......................................................................................................................... 2
2.
Business Environmental Analysis: ................................................................................. 3
2.1 Environmental Analysis: .............................................................................................. 3
2.2 Industry Analysis .......................................................................................................... 4
SWOT Analysis:................................................................................................................. 4
3.
Our Product ..................................................................................................................... 6
3.1 Product.......................................................................................................................... 6
4.
Market Research and Analysis ....................................................................................... 8
4. 1Market: ......................................................................................................................... 8
4.2 Potential Market: .......................................................................................................... 8
5.
Marketing Strategy ....................................................................................................... 10
5.1 Marketing Promotion ................................................................................................. 10
5.2 Marketing Budget ....................................................................................................... 10
5.3 Marketing Mix ............................................................................................................ 10
6.
Competitive Analysis .................................................................................................... 12
v
6.1 Competition: ............................................................................................................... 12
6.2 Competitive Analysis ................................................................................................. 12
7.
Company Strategy......................................................................................................... 14
7.1 Diffrentiation Strategies ............................................................................................. 14
8.
Organization Structure .................................................................................................. 15
8.1 Organizational Structure of company:........................................................................ 15
8.2 Job Description: .......................................................................................................... 15
9.
Human Resources ......................................................................................................... 18
9.1 Human Resource Planning ......................................................................................... 18
10.
Operation Plan ........................................................................................................... 19
10.1 Location .................................................................................................................... 19
10.2 Layout Design .......................................................................................................... 19
10.3 Raw Material & Suppliers ........................................................................................ 21
10.4 Power ........................................................................................................................ 21
10.5 Production: ............................................................................................................... 21
10.6 Process Strategy ....................................................................................................... 22
10.7 Capacity Design: ...................................................................................................... 23
10.8 Quality Management ................................................................................................ 23
10.9 Inventory Management ............................................................................................. 24
10.10 Supply Chain Management .................................................................................... 24
11.
Financial Plan ............................................................................................................ 25
11.1 Initial Investment ...................................................................................................... 25
11.2 Capital Structure ....................................................................................................... 25
11.3 Projected Income Statement ..................................................................................... 26
11.4 Projected Cash Flow Statement ................................................................................ 27
11.5 Projected Balance Sheet ........................................................................................... 28
vi
11.6 Projected CFATBD .................................................................................................. 29
11.7 Projected NPV .......................................................................................................... 29
12.
Critical Risk & Contingency ..................................................................................... 31
13.
Future Plan and Exit Strategy ................................................................................... 32
13.1 Future Plan ............................................................................................................... 32
13.2 Exit Strategy ............................................................................................................. 32
14.
Appendix ................................................................................................................... 33
14.2 Furniture Cost ........................................................................................................... 33
14.3 Machinery & Equipment .......................................................................................... 33
14.5 Depreciation ............................................................................................................. 34
14.6 Total Depreciation .................................................................................................... 34
14.7 Rent Expense ............................................................................................................ 35
14.8 Salary Expenses ........................................................................................................ 35
14.9 Marketing Expenses ................................................................................................. 35
14.10 Opening Cash Balance ........................................................................................... 35
14.11 Net Cash from Operation ....................................................................................... 35
14.12 Retained Earning .................................................................................................... 36
14.13 Calculation Outflow at zero Period ........................................................................ 36
14.14 Forecasted Sales Revenue for Year 1 ..................................................................... 36
14.15 Sales Revenue for 5 years ...................................................................................... 36
14.16 Raw Material Required........................................................................................... 37
14.17 Variable Costing per Piece ..................................................................................... 37
14.18 Selling Price ........................................................................................................... 37
14.19 Labor Cost .............................................................................................................. 38
14.20 Our Products ........................................................................................................... 39
vii
List of Tables
Table 1 Price list of items....................................................................................................... 7
Table 2 Target Market in Nepal ............................................................................................. 8
Table 3 Marketing Budget ................................................................................................... 10
Table 4 Human Resources Planning .................................................................................... 18
Table 5 Output Capacity ...................................................................................................... 23
Table 6 Initial Investment .................................................................................................... 25
Table 7 Capital Structure ..................................................................................................... 25
Table 8 Projected Income Expenses .................................................................................... 26
Table 9 Projected Cash Flow Statement .............................................................................. 27
Table 10 Projected Balance Sheet ........................................................................................ 28
Table 11 Projected CFATBD ............................................................................................... 29
Table 12 Projected NPV....................................................................................................... 29
viii
List of Figures
Figure 1 Competitive Analysis ............................................................................................ 12
Figure 2 Organizational Structure ........................................................................................ 15
Figure 3 Ground Floor Layout Design ................................................................................. 19
Figure 4 First Floor Layout Design ...................................................................................... 20
Figure 5 Second Floor Layout Design ................................................................................. 20
Figure 6 Process Flow Chart ................................................................................................ 22
ix
Chapter 1
1. Company Background
1.1 Company Overview:
Hamro Khelauna is a toy manufacturing company which is first of its kind in Nepal. Beside
few household toys manufacturer, this type of industry actually does not exist in Nepal.
Hamro Khelauna is established with the innovative ideas of manufacturing and supplying
toys in commercial segment. Its product lines are toys of wooden materials. All toys are
handmade products with care and love. Similarly, raw-materials and color used while
manufacturing toys are natural or eco-friendly to ensure that the toys does not harms a
children from any aspects .Our handcrafted toys are also designed to nurture creative play
of children and made to last for lifetime.
Hamro Khelauna targets to provide its customers with high quality of toys along with
ensuring to satisfy the customers and developing the domestic Brand throughout the nation.
The wooden toys are made by best woods of Nepal giving the toys finest finishing.
This company is register under The Industrial Enterprises Act, 2049 (1992) as Cottage and
Small Industry.Hamro Khelauna is a partnership business where the major objective is to
manufacture toys made with domestic supplied raw materials and the products are human
friendly. Similarly, produced products are distributed to market through various market
intermediaries like dealers, sub-dealers and retailers. Our company will also take social
responsibility of encouraging the consumer to use local manufactured products as well as
eco-friendly products. There is a huge potentiality of Toys manufacturing industry in Nepal
especially in Kathmandu Valley. Since living standard of people has increased from past
decades, trend of buying toys by parents to their children has also increased. Few decades
ago only children’s of rich family had opportunities of playing with toys but now the
scenario is different. Due to easy and cheap availability of toys in market, people of all
standard buy toys for their children. Even pre-primary school like Montessori, Euro kids
and Bella etc uses toys as learning material for children which builds child’s creativity. The
market of toys is increasing rapidly so there is a big opportunity for us to enlarge our
company as well as our product lines.
1
1.2 Mission:
Hamro Khelauna as a best toys manufacturer and seller, compete with the dominant
supplies mostly imported products and establish itself in market as a major player.
1.3 Vision:
Every child throughout Nepal will be playing toys made by Hamro Khelauna.
1.4 Goals & Objective:

Our company will also take social responsibility of encouraging the consumer to
use local manufactured products as well as eco-friendly products.

To achieve industry-leading customer satisfaction concentrating both on quality
products.

To ensure good access to the suppliers and distribution channels in order to fulfill
our delivery promises.

To establish the committed team of professionals.
1.5 Values:

Focuses to provide high quality product that the toys does not harms a children from
any aspects.

Sustain and strengthen the traditional knowledge, skills and capabilities of our
craftspeople engaged in the manufacture of traditional as well as innovative toys.

Equal dignity and respect at all levels of management.

Foster the environment of trust and collaboration.
2
Chapter 2
2. Business Environmental Analysis:
2.1 Environmental Analysis:
Business Environment is those factors which affects business organization directly and
indirectly. Forces and condition that affects the performance and outcome of the business
organization is the Business Environment of the business organization. Basically these
factors are uncontrollable and they give both negative threats as well as create huge
possibilities and opportunities to the organization. These environmental factors plays role
through the whole industry instead of any single organization.
a. Political Analysis
Politically Nepal is in the stage of transition phase. So the political instability seems to be
normal currently. All the sectors in the economy are more or less affected by it, and the
industry sector also can’t remain unaffected. The effect is badly seen in industrial sector
and it’s obvious that our organization will also have effects.
Nepal witnesses Political strikes and Bandha regularly. They create obstacles during
smooth supply of raw materials, operation of factory and inclining the sales due to which
we fail in reaching the target.
b. Economic Analysis
Though the economy in the world is shrinking, but the disposable income of the people in
Nepal is increasing. The inflow of remittance in the country is directly helping in this
prospect. The degree of people standard and purchasing power is increasing day by day.
Parents are buying toys more often for their children. Hence in Nepal, the economic
environment seems to be favorable.
c. Social Analysis
Today’s consumers are more aware about quality and post effects of any product. It is an
ethical issue for an organization to supply those products which are human friendly and
does not affects environment .Hamro Khelauna is committed towards society and
guarantees that its products non-hazardous.
d. Technological Analysis
Technological Environment is technical innovation for any industry .It affects the
effectiveness and productivity of any organization. Globally, modern technology is widely
used for bulk production of toys. But, Hamro Khelauna will use traditional technology in
3
innovative way while manufacturing. Hamro Khelauna insists in a hand job and
craftsmanship for quality and durability for toys mostly wooden and woolen products.
e. Legal Analysis
In Nepal laws and regulation are changing according to change in political system. It also
impacts in industry and business sector of Nepal. Policies for business sector also changes
with the change of government.
However, Hamro Khelauna will not face any legal barriers as it comes under Small and
Cottage industry and rather it get various subsidies and facilities from government.
2.2 Industry Analysis
SWOT Analysis:
Strength:

Hamro Khelauna is the only manufacturing company of its kind in Nepal.

Quotas and tariffs facilities by government in order to protect local manufacturing.

Handmade items are made with care which ensures that each item is personally
inspected for quality.

Own in-house team of designers who are involved in designing toys that are unique,
innovative and fun to play.

Research and development work on new product development.

Quality Certified by NS certification.
Weakness:

Uncertainty in business due to being new industry.

Lack of Political and Economic stability of our country.

Electricity and Energy Shortage for factory operation.

Not in use of Technology and IT system like other toy industry in Nepal.
Opportunities:

Changing trends of buying toys by parents in Nepal.

Awareness towards health by parents to avoid hazardous product.

Toys use for children learning materials.

Develop new products.

Innovative toys which have Extra learning dimension and teamwork.
4
Threat:

Threat of new entrants.

High Competition with imported products from international market.

Supply needs to be matched with demand in all the markets.

Possible negative publicity.

Computer games, TV, Play stations, Wi-Fi and other gaming devices.
5
Chapter 3
3. Our Product
3.1 Product
The product is wooden toys made from natural wood. The salient feature of our product
will be the material that we will be using the product which is biodegradable and
environmental friendly. Its product lines are toys of wooden materials. All toys are
handmade products with care and love. Similarly, raw-materials and color used while
manufacturing toys are natural or eco-friendly to ensure that the toys does not harms a
children from any aspects .Our handcrafted toys are also designed to nurture creative play
of children and made to last for lifetime. It targets to provide its customers with high
quality of toys along with ensuring to satisfy the customers and developing the domestic
Brand throughout the nation. The wooden toys are made by best woods of Nepal giving the
toys finest finishing. Our wooden toys are handcrafted of quality hardwoods and we use
only natural, child-safe wood finishes. Each product was designed to encourage play,
development and imagination.
Hamro Khelauna has a diversified range of wooden products across various categories
like cars, animal set, puzzle, blocks and counting ambus. Our product are more than
just traditional playing with toys, but even specially designed to encourage the spirit
of fun as well as learning environment. Our product also focuses on safety, quality and
health measures meeting quality requirements. The traditional knowledge, skills and
capabilities of our craftspeople engaged in the manufacture of innovative toys. The main
features of our handcrafted wooden toys are:

Design: safe and simple, to encourage the child to use his or her own imagination.

Durability: sturdy enough to withstand years of hard play and then be passed on to
the kids of the next generation.

Craftsmanship: each wooden toy is carefully handmade with all edges and corners
rounded, and then hand sanded to a pleasant feeling satin smooth natural finish that
the toddler can safely chew on.

Materials: saal wood is the primary material of our wooden toys, with most wheels
and turnings made from hard maple.
6
Table 1 Price list of items
Items
Cars
Price
600
Animal Set
840
Puzzle Cars
150
Blocks
400
Counting Ambus
450
7
Chapter 4
4. Market Research and Analysis
4. 1Market:
The main consumers of toys in Nepal are children’s of age below 8 years. The total
population of children (0-14 years) in Nepal according to the 2011 census is 9905263.
Children’s are from very rich family to poor family and similarly their purchasing power is
affected by their income. Though Parents income will create segments in toy market,
Hamro Khelauna will offer varieties of toys with respect to price.
Hamro Khelauna core competence will be manufacturing quality toys without using any
harmful materials .Increasing awareness and quality consciousness of consumer gives more
scope of Hamro Khelauna products in the market.
We are also committed towards prompt delivery and proper supply distribution of our
products. For this, we will hire regional dealers, sub dealers and retailers in various
wholesale markets, shopping malls and retail market. We are also planning to use Ecommerce as online retailing of our products.
4.2 Potential Market:
Table 2 Target Market in Nepal
Target Market in Nepal
District Dealers
Sub Dealers
Shopping Malls
Retail Stores
E-Commerce
Population
45
120
30
More than 250
1
We will appoint dealers at 45 districts of Terai and Hilly region of Nepal. Further sub
dealers will be hired according to the high population density in some places. Some dealers
will be located in major wholesale market also like Mahaboudha Wholesale Market in
Kathmandu.
Similarly, retailing of our product will be done by large span of retailers of cities as well as
rural area throughout Nepal. Our products will be positioned in various shopping malls of
big cities like Kathmandu, Pokhara and Dharan etc.
8
Targeting the Customers
Defining the target customer of Hamro Khelauna has been done on the basis of Income of
general consumer on the market region and Consumer Awareness of the people.
a) Income
Income of the consumer plays vital role in their expenditure and market demand of any
product .Hamro Khelauna offers variety of product which are of best quality at very
economic rates .It meets the general economic of Nepalese Market.
b) Awareness
Every parents love their children more than themselves. No parents will accept that their
kids play with hazardous toys. Hamro Khelauna will be new solution for all and kids will
freely play with toys without any risks.
9
Chapter 5
5. Marketing Strategy
5.1 Marketing Promotion
As Hamro khelauna is new in market, it will require market advertisement and promotion.
To increase the periodic growth of sales and developing the brand image, market promotion
is very essential. We have planned to promote Hamro Khelauna through different Banners,
Newspapers and Broachers.
Similarly, we will also hire Sales representative for the Market promotion. Their basic work
will be explaining about Hamro Khelauna products, its extra features and benefits.
5.2 Marketing Budget
Table 3 Marketing Budget
Marketing Methods
Broachers
Quantity
1000pc(A4-80 gram)
Banners (Flex Print)
50 pc( 4'' X 2''Poll Banner)
Sales Representatives
3 employees
Rates
25
Amount
25,000
200
10,000
15000
45,000
80,000
5.3 Marketing Mix
Product:
Hamro Khelauna deals with the manufacturing toys which are made of natural materials. In
current global scenario of toys industry, plastic toys are dominant player in market. But,
toys made by plastics and harmful chemicals are not good for children from any aspects.
Many famous toys brands of worlds have also been blamed for using hazardous materials
and risking the life of children.
However, Hamro Khelauna introduces itself as nature and human friendly toys
manufacturer and guarantees for materials and color used.
Pricing:
Price of the product is the most important factor for its market demand.Hamro Khelauna
products are available at very competitive price in the market. Our toys can give tough
competition to imported toys in the market relevant to price.
Place:
The factory and administrative office of Hamro Khelauna will be located in same place, we
have chosen Balaju industrial Area for the location.
10
Distribution Channel: For easy and convenient reach of customers to our products, we have
planned to appoint dealers and sub dealers in the market of national level. Geographical
economic zone has been taken as a base for segmenting the markets. We will use our
company delivery van to transit goods from our factory warehouse to transport company in
Kathmandu. Transport Company will further convey the goods to different region of Nepal
where dealers are located.
Promotion:
It is essential to promote a completely new brand in market. Our promotional strategy will
be creating awareness in general people about harmful toys and chances of risks. The
medium of promotion will be Banners, Broachers and sales representative. Sales
representative will make contacts with interested toys traders in the market. Besides from
these efforts e-commerce is also a promotional tool for marketing of this product. So we
will do online selling also in order to promote our product.
11
Chapter 6
6. Competitive Analysis
6.1 Competition:
It is essential for every business organization to identify its existing competitors their skill,
strength as well as weakness. Beside few household toys manufacturer exit, where there is
no direct competition in toys manufacturing industry in Nepal. But the produced toys face
tough competition in Market. In Nepal toys are imported mostly from China and small
percentage from other countries. China has Become World Largest Manufacturer &
Exporter of Toys. Chinese mega production and cheap supplies of toys in Nepalese market
will automatically give hard competition to domestic manufacturers like Hamro Khelauna.
6.2 Competitive Analysis
Under the competitive analysis we can see the five competitive forces. Given below is
the illustration of Porter Five forces model for analysis the competitiveness of the business
Figure 1 Competitive Analysis
Intensity of rivalry
Although there is few number of wooden toys factory in the valley but still Hamro
Khelauna is not competition free. The plastic toys, rubber toys and other toys can stand as a
competition for us. So there is intense rivalry in this industry as there are various number of
other toy factory are present around the country. However, Hamro Khelauna stands out
from the competition on the context of the unique service and operation it is going to
12
provide. The factory will be able to achieve the competitive advantage on the
differentiation and cost leadership. Environment protection will be our main focus.
Threat of new entrants
The new entrants can easily enter the business of the potentiality of growth and values that
can be generated and its industry structure which is very easy. Due to the facts that
customers face low switching costs in such industry, the threat of new entrants is high.
However because of cost disadvantage, capital requirements and low level of differentiation
possible, this threat can be minimized.
Threat of substitute products
The threat of the substitute products is very high. Since the price of wooden toys is high in
comparison to other plastic toys which are easily available in the market. Again when the
economic situation remains unstable the consumer wants to spend on average. In this case,
the threat of the substitutes can become higher. The substitutable product can be plastic
toys, rubber toys etc.
Bargaining power of customer
The bargaining power of customer is high as there are many competitors product in the
market which is cheap and easily available.
Bargaining Power of suppliers
Since there are many suppliers who supply wood, glue, polish, enamel and other required
raw material. These supplies are easily available in the local market. In fact there is wide
availability of such supplies. Hence, the bargaining power of suppliers for hamro khelauna
is very low.
13
Chapter 7
7. Company Strategy
Hamro Khelauna focuses on providing high quality ensuring safety and health measure.
Differentiation in terms of service will create a competitive advantage for Hamro Khelauna.
7.1 Diffrentiation Strategies
Hamro Khelaunas’ core concept is to create a pool of varieties of toys which are crafted
individually. This is completely opposite to mega mass production and supply of toys in the
market. Hamro Khelauna does many researches and field work to find out new concepts of
toys and changing desires of children for toys, forecasting its possible demand in the
market and find out availability of similar substitute product in the market.
Among different sample designs, the best one is selected and forwarded to production line.
After the bulk production is finished we also do lab tests of random samples from each
batch in our own company to ensure that it is not hazardous to children in any condition
14
Chapter 8
8. Organization Structure
8.1 Organizational Structure of company:
Owner
Factory
Factory
Supervisor
Wooden Line
labor
Adminstarative
Sales
Representative
Office
Assistant
Accountant
Inspection Staff
Helper
Figure 2 Organizational Structure
8.2 Job Description:

Owner:
The owner of the business will also be actively involved in the operation of the
business. The major duty of the owner will be to look after the flow of the business
operation as well as the keeping update to factory and administration department.
15

Factory Supervisor:
Factory Supervisor job is to manage wood line labor and inspection staff for entire
operation and production process of wooden toys. Factory supervisor need to timey
manage all the purchase of the raw material and other required materials for production
process.

Wood Line Labor:
Wooden Toy is a labor intensive product and it is all depend upon labor skills .We have
many kinds of labor requirements like we need skilled and unskilled workers.
Skilled Labors (Carpenter): The primary work performed is the cutting and shaping and
installation of wooden materials during the construction of toys. Skilled workers are
generally more trained, higher paid, and have more responsibilities than unskilled
workers whereas Unskilled Labors are responsible for segment of the work force
associated with a low skill level value of the manufacturing work. Unskilled labor is
generally requires no specific education or experience and they will be assisting the
carpenters in the crafting work. Similarly, they will do jobs of assembly and finishing.

Inspection Staff:
Inspection staff is responsible for conducting inspection during the production
process. This inspection helps to control the quality of products by helping to fix the
sources of defects immediately after they are detected, and it is useful for factory that
wants to improve productivity, reduce defect rates, and reduce re-work and waste.

Helper:
Helpers will be work engaged in fabricating, assembling, installing, and processing
materials, parts, and assemblies for toys products, performing any combination of
following tasks, also sorting and counts parts and materials

Administrative:
The Administrative head would be responsible for keeping the industry keys and
looking after the cash drawers. The person will have to guide the sales representative,
office assistant and accountant.
16

Sales Representative:
The job description of sales representative includes visiting to different clients of the
firm like shopping malls, retail stores and dealers. They need to collect order from the
targeted client and they also need deliver the order on time.

Office Assistant:
Office assistant is responsible for coordinating between departments and operating units
in resolving day-to-day administrative and operational problems.

Accountant:
The accountant will be need to process and check bills, invoices, receivable
management, maintain account and so on. The accountant will also be responsible for
receiving payments.
17
Chapter 9
9. Human Resources
9.1 Human Resource Planning
Table 4 Human Resources Planning
Designation
Owner
Number
2
Salary(per month)
-
Total
-
Accountant
1
15000
15000
Office Assistant
2
8000
16000
Sales Representative
3
15000
45000
Factory Supervisor
1
12000
12000
Labor

Skilled
7
12000
84000

Unskilled
7
8000
56000
 Helper
Inspection Staff
5
6000
30000
2
12000
24000
Inventory Manager
2
10000
20000
Driver
1
12000
12000
Total
314,000
Success of the Hamro Khelauna purely depends on the staff and the input they are
providing so we have to choose carefully. As this will also help to build image of the
wooden toys we want to create and deliver quality product. So for this we will choose
trained staff and experience staff.
We will need 1 accountant, 2 Office Assistant, 3 Sales Representative, 1 Factory
Supervisor, 14 Labor which include 7 Skilled & 7 Unskilled labor, 5 helper, 2 inspection
staff and 1 accountant for this. Skilled labor include carpenter where as unskilled labor
include assembling person.
18
Chapter 10
10.Operation Plan
10.1 Location
Hamro Khelauna will be established in Balaju, Kathmandu. We are planning to rent a three
storied building in Balaju Industrial Area .Balaju Industrial Area has various advantages for
a factory than any other usual place. The duration of load shedding in this area is also
comparatively lesser. Similarly price of the monthly rent of the building is also cheaper
than the main markets.
The contract with the house owner will be done for 5 years .Rent of the house is fixed as
Rs.40000/- per month for the whole building as a same and interest increase by 5%per year.
10.2 Layout Design
Figure 3 Ground Floor Layout Design
19
Figure 4 First Floor Layout Design
Figure 5 Second Floor Layout Design
Above three figures are the diagrammatic layouts of Hamro Khelaunas’ operational
building. In ground floor there are three rooms. Administration will be in ground floor,
inventories of both raw materials and finished goods will be stored in two different stores in
ground floor.
First floor will be totally for production, the production premises will be divided for
wooden line manufacturing respectively. Similarly, second floor consists of three rooms.
One is for finishing department second is for inspection of each individual product and lab
testing the random samples and after approval the products goes for packaging in third
room.
20
10.3 Raw Material & Suppliers
The type of materials required for wooden toy factory is small in number. The basic and
main line material is wood. Similarly other materials like glue, polish, enamel and fittings
are necessary for crafting, assembly and finishing of a toy.
We have decided to select few contractors of woods for our wood requirements .Similarly,
we also have contacted with direct importers of glue, polish, enamel and fitting differently.
Instead of buying in domestic or local market, we decided to go with direct importers
because they will supply materials in cheaper price and with some credit terms.
10.4 Power
Currently whole industrial sector in Nepal are facing the problem of electricity load
shedding .As we are locating our factory in industrial area ,our factory will be affected
lesser by the impact of heavy load shedding .Even for load shedding also we have planned
alternative power source that is diesel generator. This will help in smooth operation of
factory.
10.5 Production:
Production time period of wood carving is a time consuming process. The time needed by
craftsmen to create carved wooden toys may range anywhere from a few hours (for small
items) to a single day for large items which require elaborate carving techniques.
21
10.6 Process Strategy
Figure 6 Process Flow Chart

Purchase of Raw Materials
Raw materials are ordered to suppliers on periodic basis. Revised order is done to maintain
the proper raw material stock. After the order is placed , the company vehicle collects the
shipment itself from suppliers .The purchase process of raw materials further goes with
quality check and inventory management of materials.

Q & C Inspection
Q & C Inspection inspects the random samples of raw materials quality, quantity and
originality .After the approval only the shipment is forwarded to stock in warehouse.
Similarly, it is the job of inventory department to maintain the scientific inventory records
while issuing the materials. Again, it is very important to apply for re-order to maintain the
sufficient stock for 30 days.

Production
Hamro Khelauna produces various types of wooden toys designed by its own designers.
For the Bulk production, factory supervisor sets the procedure plan.
22
Wooden products require more handwork than machinery operations. Skilled labor cuts and
gives shapes to toys parts. Similarly, other worker assembles and gives the final finishing to
the toy.

Inspection & Packaging
The finished toys are inspected individually and so on alter piece are rejected and send back
for repairing. Final approved toys are forwarded for attracting packaging.
Similarly, random samples are lab tested in Q&C department for ecological assurance that
we are committed into.
10.7 Capacity Design:
The total output of wooden cars 3500 units per year where as it produces 11 units per day
we assume 312 days as a working day. We have managed out production in the following
ways.
Table 5 Output Capacity
Items
Cars
Units
3500
Units/per day
11
animal set
1600
5
wooden puzzle
5600
17
wooden blocks
4200
13
wooden counting ambus
2100
8
10.8 Quality Management
Standard of Woods:
Wood Requirements
no insect holes, knots up to 5 mm not
loose
no splinters at edges
Quality Standards for our Production Facilities

All stages in our production process are controlled and handled according to strict
internal standards to ensure the highest quality standards.

The selection of wood must fit our requirements for the color of the wood, insect
holes, knots etc.

Gluing, coloring, varnishing is done according to internal principles and technical
requirements.
23

Packaging care about design, information leaflets and labeling is to satisfy our
customers and to reduce damage in transporting our goods.
Well-made wooden toys are naturally beautiful to the touch. A natural beauty can be found
in well-made wooden toys. The designer team has years of hard-won experience in
producing toys in traditional handicrafts that are unique in their form, their pictures, as well
as their function. The wood structures convey sensory experiences while enhancing child
development. Since wood is a completely natural material, you don't have to worry if your
child puts it into his or her mouth. Well-made wooden toys are completely safe to play with
and will last a long time.
10.9 Inventory Management
Hamro Khelauna manufacturing materials inventory includes the ingredients to form the
toys to be crafted, woods, glue, fittings, polish and enamel. The firm's work in process
includes those materials from the time of release to the work floor until they become
complete and ready for sale to wholesale or retail customers.. It also includes packaging
cartons, packing plastics, and boxes. Its finished goods inventory consists of all the packed
and labeled toys in its warehouse that it has manufactured and wishes to sell to distributors
(wholesalers), to stores (retailers).
10.10 Supply Chain Management
The major raw material for producing the product so the wood will be purchased from local
contractor in the market. The product will be supplied to the shopping mall, retail store and
dealers. The demand record of the customer will be properly maintained so as to supply the
toys at right time and in right quantity. The toys will be distributed directly to the customer
by own transportation system.
24
Chapter 11
11.Financial Plan
This section details the calculations, assumptions and methodology used as a basis for the
projections of the expected financial performance of the Hamro Khelauna.
11.1 Initial Investment
Table 6 Initial Investment
Fixed Assets Required
Items
Quantity
Unit Cost
Total
Machinery & Equipment
968,500
Computer System
1
50,000
50,000
Furniture
200,000
Generator
1
500,000
500,000
Delivery Van
1
1,200,000 1,200,000
Miscellanous
50,000
Pre-Operating expenses
112,000
Working Capital
700,000
Total
3,780,500
The above table shows the various investments needed for the establishment of Hamro
Khelauna. The Initial investment for the project is estimated at Rs 37, 80,500/For the Calculation of Pre-Operating Expenses refer Appendix (Table 14.1)
For the Calculation of cost related to furniture’s refer Appendix (Table 14.2)
11.2 Capital Structure
Table 7 Capital Structure
Capital Structure
Prajeena Shrestha
Percentage
50%
Amount
1,890,250
Rubina Shakya
50%
1,890,250
Out of 37, 80,500/- each partner will invest 50% each i.e. Rs 18, 980,250/- will be equity
investment and we will not use loan.
25
11.3 Projected Income Statement
Table 8 Projected Income Expenses
Particulars
Year 1
Year 2
Year 3
Year 4
Year 5
6,909,000
7,599,900
7,979,895
8,378,890
8,797,834
2,958,840
3,106,782
3,262,121
3,425,227
3,596,489
3,950,160
4,493,118
4,717,774
4,953,663
5,201,346
Salary and Wages
1,728,000
1,814,400
1,905,120
2,000,376
2,100,395
Rental Expenses
480,000
504,000
529,200
555,660
583,443
Marketing Expense
420,000
441,000
463,050
486,203
510,513
Electricity
180,000
189,000
198,450
208,373
218,791
Internet
19,200
20,160
21,168
22,226
23,338
Diesel
248,600
261,030
274,082
287,786
302,175
Telephone
60,000
63,000
66,150
69,458
72,930
Water
Depreciation
14,000
14,700
15,435
16,207
17,017
522,775
430,359
354,605
292,454
241,418
50,000
52,500
55,125
57,881
60,775
22,400
22,400
22,400
22,400
22,400
3,744,975
3,812,549
3,904,784
4,019,023
4,153,195
EBIT
205,185
680,569
812,989
934,640
1,048,151
EBT
Less : Taxes (20 %)
205,185
41,037
680,569
136,114
812,989
162,598
934,640
186,928
1,048,151
209,630
Net Income
164,148
544,455
650,392
747,712
838,521
Sales Revenue
Payment to Suppliers and
Purchase
Gross Profit
Less Operating Expenses
Maintenance
Pre-Operating Expenses
Write off
Note:
Electricity15000*12
Telephone 5000*12
Internet 1600*12
Rent 40000*12
Advertisement 35000*12
Pre-operating Expenses Written off 112000/5
Salaries, advertisement, rent, electricity, telephone, internet, water and maintenance cost are
expected to increase by 5% per annum
Calculation of Diesel Cost is shown in Appendix (Table 14.4)
26
Calculation of Depreciation is show in Appendix (Table 14.6)
Analysis:
We can see in the income statement for the five years that the increase in the sales revenue
and the net income have increased from Rs 1,64,148/- to Rs 8,38,521 /- by the end of 5 year.
From this we can analyzed that the project seems to be profitable with respect to the amount of
profit it will be giving in the period of five years.
11.4 Projected Cash Flow Statement
Table 9 Projected Cash Flow Statement
Particulars
Year 1
Year 2
Year 3
Year 4
Year 5
Sales Revenue
Payment to Suppliers and
Purchase
6,909,000
7,599,900
7,979,895
8,378,890
8,797,834
2,958,840
3,106,782
3,262,121
3,425,227
3,596,489
Contribution Margin
Payment for other operating
Expense
Salary and Wages
3,950,160
4,493,118
4,717,774
4,953,663
5,201,346
1,728,000
1,814,400
1,905,120
2,000,376
2,100,395
Rental Expenses
480,000
504,000
529,200
555,660
583,443
Marketing Expense
420,000
441,000
463,050
486,203
510,513
Electricity
180,000
189,000
198,450
208,373
218,791
Internet
19,200
20,160
21,168
22,226
23,338
Diesel
248,600
261,030
274,082
287,786
302,175
Telephone
60,000
63,000
66,150
69,458
72,930
Water
Maintenance
14,000
14,700
15,435
16,207
17,017
50,000
52,500
55,125
57,881
60,775
3,199,800
3,359,790
3,527,780
3,704,168
3,889,377
EBIT
750,360
1,133,328
1,189,994
1,249,494
1,311,969
EBT
750,360
1,133,328
1,189,994
1,249,494
1,311,969
Taxes (20%)
Cash from Operating
Activities
41,037
136,114
162,598
186,928
209,630
709,323
997,214
1,027,397
1,062,566
1,102,339
27
11.5 Projected Balance Sheet
Table 10 Projected Balance Sheet
Assets
Year 1
Year 2
Year 3
Year 4
Year 5
1,568,500
1,568,500
1,568,500
1,568,500
1,568,500
200,000
200,000
200,000
200,000
200,000
Delivery Van
1,200,000
1,200,000
1,200,000
1,200,000
1,200,000
Less Accumulated Depreciation
2,968,500
522,775
2,968,500
953,134
2,968,500
1,307,739
2,968,500
1,600,193
2,968,500
1,841,611
Net Fixed Assets
Preliminary Expenses
2,445,725
112,000
2,015,366
112,000
1,660,761
112,000
1,368,307
112,000
1,126,889
112,000
Less :Write off
22,400
44,800
67,200
89,600
112,000
Net Preliminary Expense
89,600
67,200
44,800
22,400
0
Current Assets
Cash
1,409,323
2,406,537
3,433,934
4,496,500
5,598,838
Total Current Assets
1,409,323
2,406,537
3,433,934
4,496,500
5,598,838
Total Fixed Assets
3,944,648
4,489,103
5,139,495
5,887,207
6,725,728
3,780,500
3,780,500
3,780,500
3,780,500
3,780,500
164,148
708,603
1,358,995
2,106,707
2,945,228
3,944,648
4,489,103
5,139,495
5,887,207
6,725,728
Fixed Assets:
Machinery, Equipment &
Generator
Furniture
Liabilities:
Equity
Retained Earning
Total Liabilities and Equity
28
11.6 Projected CFATBD
Table 11 Projected CFATBD
Particulars
Sales Revenue
Payment to Suppliers and
Purchase
Contribution Margin
Payment for other operating
Expense
Salary and Wages
Year 1
Year 2
Year 3
Year 4
Year 5
6,909,000
7,599,900
7,979,895
8,378,890
8,797,834
2,958,840
3,106,782
3,262,121
3,425,227
3,596,489
3,950,160
4,493,118
4,717,774
4,953,663
5,201,346
1,728,000
1,814,400
1,905,120
2,000,376
2,100,395
Rental Expenses
480,000
504,000
529,200
555,660
583,443
Marketing Expense
420,000
441,000
463,050
486,203
510,513
Electricity
180,000
189,000
198,450
208,373
218,791
Internet
19,200
20,160
21,168
22,226
23,338
Diesel
248,600
261,030
274,082
287,786
302,175
Telephone
60,000
63,000
66,150
69,458
72,930
Water
Depreciation
14,000
14,700
15,435
16,207
17,017
522,775
430,359
354,605
292,454
241,418
Maintenance
50,000
52,500
55,125
57,881
60,775
Pre-Operating Expenses Write off
22,400
22,400
22,400
22,400
22,400
3,744,975
3,812,549
3,904,784
4,019,023
4,153,195
EBT
205,185
680,569
812,989
934,640
1,048,151
Taxes (20%)
41,037
136,114
162,598
186,928
209,630
CFAT
Add Depreciation
164,148
522,775
544,455
430,359
650,392
354,605
747,712
292,454
838,521
241,418
Add Pre-Operating expenses
22,400
22,400
22,400
22,400
22,400
CFATBD
709,323
997,214
1,027,397
1,062,566
1,102,339
11.7 Projected NPV
Table 12 Projected NPV
Year
CFATBD
PVIF @ 12 %
PV @ 12 %
0
3,780,500
1.000
3,780,500
1
709,323
0.893
633,324
2
997,214
0.797
794,973
3
1,027,397
0.712
731,281
4
1,062,566
0.636
675,280
5
2,302,339
0.567
1,306,409
NPV
360,766
29
11.8 Ratio Analysis
Particulars
Year 1
Year 2
Year 3
Year 4
Year 5
Total Sales
6,909,000
7,599,900
7,979,895
8,378,890
8,797,834
Net Income
164,148
544,455
650,392
747,712
838,521
Total Equity
3,944,648
4,489,103
5,139,495
5,887,207
6,725,728
Total Assets
3,944,648
4,489,103
5,139,495
5,887,207
6,725,728
Contribution Margin
3,950,160
4,493,118
4,717,774
4,953,663
5,201,346
Fixed Expense
3,744,975
3,812,549
3,904,784
4,019,023
4,153,195
Fixed Asset
2,445,725
2,015,366
1,660,761
1,368,307
1,126,889
Total Fixed Asset
3,944,648
4,489,103
5,139,495
5,887,207
6,725,728
Total Asset Turnover
2
2
2
1
1
Fixed Asset Turnover
3
4
5
6
8
Net Profit Margin
2.38%
7.16%
8.15%
8.92%
9.53%
Return on Equity
4.16%
12.13%
12.65%
12.70%
12.47%
Return on Assets
4.16%
12.13%
12.65%
12.70%
12.47%
CM Ratio
57.17%
59.12%
59.12%
59.12%
59.12%
6,550,123
6,448,749
6,604,761
6,797,990
7,024,936
358,877
1,151,151
1,375,134
1,580,900
1,772,898
Breakeven point (In
NRs)
Margin of Safety
30
Chapter 12
12.Critical Risk & Contingency
There are various risk associated with the business. The risk can be both internal as well as
external. Some of the internal and external risks of Hamro Khelauna are as follows:
Internal Risk

Delay in opening of the firm unavailability of staff member in the market.

There may be some technical problems which adversely affect the production
process.

There may be operating problem such as breakdown of equipments, change in
infrastructure.
External Risk

There may be risk from the political instability due to which it will hamper the
business operation.

The suppliers may not be able to supply inputs in time which may hamper the
business.

The price of wooden toys is high price in comparison to other plastic toys which
consequently decrease in buying wooden toys.
31
Chapter 13
13.Future Plan and Exit Strategy
13.1 Future Plan
One of the main objectives of Hamro Khelauna is to achieve higher growth and lead the
market. Some of the future plan that the firm would like to purse are as follow: Our Future
Plans are as follows:

Hamro Khelauna plans to expand its chain in different parts of Nepal and major
cities like Pokhara, Chitwan and Dharan.

Manufacturing new products like clothes, shoes, goodies and accessories for
children.

Supplying our products to primary school.
13.2 Exit Strategy
Since there is tough completion in the market we also need to think about alternative plans.
There are many competitors and new competitors may emerge. The firm will try it best to
keep its competitive edge and be market leader. Nevertheless if such worst situation ever
prevails then the exit strategy will be to lease to other or we might sell the overall factory so
that the loss is minimized.
32
14.Appendix
14.1 Pre-Operating Expenses
S.N
Particulars
Amount
1
Company Registration
15,000
2
PAN Registration
15,000
3
Legal
10,000
4
Transportation and Communication
2,000
5
Rent
40,000
6
Salary
30,000
Total Amount (In NRs)
112,000
14.2 Furniture Cost
Particular
Bench
Cutting Table
Office Table
Chair
Sofa Set
Tea Table
Racks for store room
Quantity
16
7
5
5
1
1
6
Rate
1,500
10,000
9,000
3,000
17,000
5,000
4,000
Amount
24,000
70,000
45,000
15,000
17,000
5,000
24,000
200,000
14.3 Machinery & Equipment
Particulars
Chemical Treatment Plant
Seasoning Plant
Surface Planner
Grinder (Small)
Grinder (Bag)
Driller
Band Show (Aara Machine)
Gaze Machine
Ziksha Machine
Sanding Machine
Number
Rate
1
200000
1
300,000
9
30,000
5
2,500
5
7,000
2
1,500
1
25,000
3
30,000
1
3,000
1
30,000
33
Amount
200,000
300,000
270,000
12,500
35,000
3,000
25,000
90,000
3,000
30,000
968,500
14.4 Diesel Cost
1 day
40km
20 days
800km
Milage
15 km
dieselm(1tr)
99
Cost (mnth)
12000
Cost (year)
144000
14.5 Depreciation
Year
Particulars
Original
Value
Deprecation
Remaining
Balance
1
Furniture
200,000
40,000
160,000
2
160,000
32,000
128,000
3
128,000
25,600
102,400
4
102,400
20,480
81,920
5
81,920
16,384
65,536
1,200,000
240,000
960,000
2
960,000
192,000
768,000
3
768,000
153,600
614,400
4
614,400
122,880
491,520
5
491,520
98,304
393,216
1,618,500
242,775
1,375,725
2
1,375,725
206,359
1,169,366
3
1,169,366
175,405
993,961
4
993,961
149,094
844,867
5
844,867
126,730
718,137
1
1
Vehicle
Machine, Equipment & Generator
14.6 Total Depreciation
Year
1
Total Deprecation
522,775
Accumulated Deprecation
522,775
2
430,359
953,134
3
354,605
1,307,739
4
292,454
1,600,193
5
241,418
1,841,611
34
14.7 Rent Expense
Year
Rental Amount
1
480,000
2
504,000
3
529,200
4
555,660
5
583,443
Total
2,652,303
14.8 Salary Expenses
Designation
Accountant
Number
1
Salary(per month)
15,000
Total
15,000
Year 1
180000
Office Assistant
2
8,000
16,000
192000
Sales Representative
3
15,000
45,000
540000
Factory Supervisor
1
12,000
12,000
144000
Inspection Staff
2
12,000
24000
288000
Inventory Manager
2
10,000
20000
240000
Driver
1
12,000
12,000
Total
144,000
144000
1,728,000
14.9 Marketing Expenses
Year
Amount
1
2
3
4
5
420,000
441,000
463,050
486,203
510,513
2,320,765
14.10 Opening Cash Balance
Opening Cash Balance
Particulars
Year 1
Year 2
Year 3
Year 4
Year 5
Working Capital
700,000
1,409,323
2,406,537
3,433,934
4,496,500
14.11 Net Cash from Operation
Particulars
Year 1
1,409,323
Year 2
2,406,537
35
Year 3
3,433,934
Year 4
4,496,500
Year 5
5,598,838
14.12 Retained Earning
Particulars
Year 1
Opening Balance
Year 2
Year 3
Year 4
Year 5
4,118,740
8,538,597
13,257,600
18,276,794
Add: Net Income
4,118,740
4,419,857
4,719,003
5,019,194
5,323,017
Closing Balance
4,118,740
8,538,597
13,257,600
18,276,794
23,599,811
14.13 Calculation Outflow at zero Period
Particular
Machinery & Equipment
Computer System
Furniture
Generator
Delivery Van
Miscellaneous
Pre-Operating expenses
Working Capital
Total
Amount
968,500
100,000
200,000
500,000
1,200,000
50,000
42,000
700,000
3,780,500
14.14 Forecasted Sales Revenue for Year 1
Items
Cars
Animal set
Wooden puzzel
Wooden blocks
Wooden counting ambus
Units
3500
1600
5600
4200
2100
Price
600
840
150
400
450
14.15 Sales Revenue for 5 years
Years
Sales Revenue
1
6,909,000
2
7,599,900
3
7,979,895
4
8,378,890
5
8,797,834
39,665,519
36
Amount
2,100,000
1,344,000
840,000
1,680,000
945,000
6,909,000
14.16 Raw Material Required
Particulars
Wood
Glue
Polish
Enamel
Fittings
Particulars
Wood
Glue
Polish
Enamel
Fitting
Year 1
1,053,000
270,000
51,840
288,000
1,296,000
2,958,840
Year 2
Year 3
Year 4
1,105,650 1,160,933 1,218,979
283,500
297,675
312,559
54,432
57,154
60,011
302,400
317,520
333,396
1,360,800 1,428,840 1,500,282
3,106,782 3,262,121 3,425,227
Unit Required Yearly
468
1200
240
400
24000
Unit
cube feet
liter
Kilogram
liter
Set
Rate
2250
225
216
720
54
Year 5
1,279,928
328,187
63,012
350,066
1,575,296
3,596,489
Amount
1,053,000
270,000
51,840
288,000
1,296,000
2,958,840
14.17 Variable Costing per Piece
Items
Cars
Animal Set
Puzzel
Blocks
Counting Ambus
Wood
91.4
128
23
61
69
Glue
23.7
33.3
5.9
15.75
16.68
Polish
4.5
6.37
1.125
3
3.34
Enamel
25.15
35
6.25
16.67
18.58
Fittings
113
160
28
75
82.40
14.18 Selling Price
Items
Cars
Animal Set
Puzzle
Blocks
Counting Ambus
Variable
Cost
257
362.25
64.275
171.4
190
Fixed Cost
333
450
84
208
245
37
Total Cost
590
812.25
148.275
379.4
435
Profit
Margin
10
27.25
1.725
20.6
15
Selling
Price
600
840
150
400
450
14.19 Labor Cost
Particular
Skilled
Unskilled
Helper
Quantity
7
7
5
Rate
12000
8000
6000
Amount
84,000
56,000
30,000
170,000
38
14.20 Our Products
39