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ELSAR Company
CONTENT
CONTENT ...................................................................................................................................... 0
I. OPPORTUNITY ........................................................................................................................... 3
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REFERENCES ............................................................................................................................. 21
APPENDIX 1: ............................................................................................................................... 21
APPENDIX 2: ............................................................................................................................... 21
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EXECUTIVE SUMMARY
The company ELSAR is licensed for designing and production of fireplaces and stoves. The
manufacturing plant and headquarters are located in Industrial Zone Struga, with a total area of
1200m2, 1000m2 of which are manufacturing facilities and 200m2 are administration. Within the
factory is showroom I. Showroom II is located in Skopje on Bul. “Partizanski Odredi” no. 35
ELSAR has currently 20 employees. Highly qualified staff and professional designers are at
customer’s disposal, to combine their wishes within the technical possibilities.
ELSAR constantly explores the market and customers' needs by designing and constructing
new types and models of stoves and fireplaces. It uses cutting edge technology for processing
metal to best satisfy customer needs.
I. OPPORTUNITY
To create strategic relationships with complementary businesses and managers of local flea
markets, swap meets and arts. These strategic relationships will lead to repeat business and
sustained long term growth.
If there is a large competitor we have opportunity to come in and take the market share. The
unique combination of high quality products and great customer service will create raving
customers who will generate positive word of mouth.
To have constant positive cash flow this can be expected after establishing strategic
relationships and making potential customers aware of our products
PESTEL analyze
To show which external factors influence our company we use PESTEL tool. As we can see,
ELSAR is political independent company, but of course we respect the government rules and law
(tax policy, labor law, environmental law, trade restrictions). Than about the economic factors we
can say we are company with stable growth and our demand is yet to get bigger. Social factors
that influence us the most is the customers’ age and lifestyle. In order to show our concern about
the environment we use antipollution filters and of course to satisfy our customers we use the
latest technology.
Political -Independent
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Social -Accepted
-Age and life cycle stage
- Lifestyle and personality
Environmental -Friendly
-Using antipollution filters
Customer Information:
• Target group: 30-50 years old, with higher income
Market Information:
• High prices for electricity
• Past & new trends
• Competition: Bionova, Blist and Jotul
Today, the fireplaces product line consists of 40 different models, aside from the custom-made
ones. 80% of the products are wood burning fireplaces, 10% gas burning fireplaces, 10% ethanol
fireplaces.
Skopje is the capital of Macedonia so the demand for fireplaces is concentrate there with 40%.
Because ELSAR is company established in Struga, it has also customers in western Macedonia
such as Struga, Ohrid, Kicevo, Debar and also other towns with 50%. ELSAR is also present in the
eastern part of the country with small percent of 10%.
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The fireplaces are usually bought from married couples from 30 to 50 years (70%). The
purchase of fireplaces from the young married couples aged 20 to 29 is also present but in smaller
quantity (20%). People aged 50 and above purchase fireplaces less frequently.
People living in houses prefer to purchase fireplaces more than ones in flats. The percent here
is 90% - 10%.
Threat of new entrants is very low. There are so many barriers to entry in this kind of business
such as the new entrants must make a big financial investment to buy the need equipment to
produce the fireplaces and stoves, in research and development, in stocks / inventory or to build a
brand. Already established firms have cost advantages unreachable to new entrants. It’s so much
harder for new entrants to attract customers. Also there are so many legal barriers and patents
especially if established companies had produced unique fireplaces. Large capital costs are
required for branding, advertising and creating product demand, also establishing new innovation
of the fireplaces limit the entry of newer players in this market.
In this industry if we analyse only Macedonian market there are many competitors such as Agens
Plus, Hubo, and Bricolage which are only sellers but on the other hand we have producers as
competitors Metalec Bitola, Koper Negotino,ELSAR Struga and MetalArt. Also if a competitor
which is producer would decide to leave an industry it would incur huge losses, so most of the time
it either bankrupts or stays in this industry for the lifetime. There is no threat of being acquired by a
competitor.
Artificial Intelligent program can be easily duplicated also substitute companies in Macedonia
might offer a similar solution with lower price. Competitors have distribution channel to promote
their product to the market. The demand for fireplaces and stoves is expected to continue, and
hence we think this force does not threaten ELSAR in the foreseeable future.
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Large number of suppliers creates a lower supplier power. Supplier power is weak when materials
are widely accessible.
Buyers have several substitutes that could choose from as well as few switching costs. The
force of the buyer’s bargaining power is proportional to the ability of buyers to force down prices,
bargain for higher-quality products or more services, and pit rival organizations against one
another.
III.3.6. Complementor’s
Complementor’s of our products fireplaces are stoves on pellets and wood that are used also
for heating and are cheaper alternative. Also other companies that produces fireplaces.
There are two kinds of competitors – traders and producers of fireplaces in Macedonia. Three
major producers are Metalec Bitola, Koper Negotino and MetalArt. The biggest traders of fireplaces
in Macedonia are Agens Plus, Hubo, and Bricolage, among about 20 smaller sellers of fireplaces.
The other competitors mostly do not produce fireplaces, and therefore do not customize them
to the unique needs of each customer, do no install them, and mostly sell low-end products.
Disadvantage is the lack of presence in the eastern and central parts of Macedonia.
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Describe the value chain using one of the models or combine or modify according to the
business needs: the generic value chain by McKinsey & Company or by Porter
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choices
Procurement Brand Transport
Parts product.
assembly
Support Infrastructure activities (or Professional Service Providers): Planning, Finance, Legal
Activities Services, MIS
Supplier
Transporter
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Opportunity Threat
- Similar products are not as reliable and - Similar products
expensive - Competition have good advertising campaign
- Changing customer tastes - Competitors copying our product
- Technological advance - Price wars with the competition
- New distributional channel - Not very popular on the new market
V. STRATEGIC CHOICE
Since the ELSAR Company have competition in the area, the combination of high quality
products and service will enable long term growth and success.
As a strategic choice that will be made in future ELSAR company plans to produces fireplaces
that will bring you lifestyle up on a new level for those that like the experience of thermal comfort.
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3. Build the business through word of mouth referrals. Word of mouth is the passing of
information by verbal means, especially recommendations, in an informal, person-to-
person manner. Word of mouth is not only the most credible form of marketing, but it is
also the least expensive.
Mission – ELSAR’s is a company that produces fireplaces that enable maximum comfort to the
customers.
Vision – Through innovations we seek to become leading designers and manufacturers of
fireplaces and stoves in the region.
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ELSAR’s goal is in the next years is to become a leading producer of fireplaces on woods and
gas in the region and to reach European producers quality and quantity. Since the company is in
the growth stage in the upcoming 2019-2020 it want to increase the total profit for 15%.
The company management plans to further expand sales locally, by educating customers
about the features of ELSAR fireplaces, building brand awareness and attracting new customers.
Their goal is to connect fireplaces with the ELSAR brand in the minds of Macedonian customers,
and to educate them about the advantages and aesthetics of a fireplace in their homes.
Company’s strategic plan: In the next 3 years, the company is planning to achieve growth
through:
1) Building and implementing digital marketing strategy in Macedonia
2) Conducting market research and entering a regional market, in order to achieve export of
the products
3) Developing new product models, gas fireplaces, energy efficient products, environment
friendly products
VII.1. Management
General Manager is on the top of the hierarchy of the company. There is one vice manager,
and one quality and environment coordinator. Together they decide on the most important aspects
of the company and its processes.
There are 4 departments, Administration, Project and Development, Production and Internal
design and relaunch. Administration department employs 2 employees working in finance, one
sales and marketing and one for procurement. The finance division is responsible for the financial
processes happening like accounting, invoices, payments, salaries etc. The marketing department
constantly communicates the value of the company to the customers in most creative ways,
through different marketing campaigns. Using different advertising techniques, the marketing team
always informs the public of what’s new in the company, active promotions and when new products
are being launched. The employees in the procurement department are taking care of the inputs or
raw materials needed for the processes. There are 2 employees in Project and development
department, and together with the top management they create innovative products and solutions.
The employees in Production department and their roles are as follows: 2 in Preparation for
production, 2 in Machine department, 5 in Welding department, 2 in Testing department, 1 in Paint
department, 2 in Assembly and packaging department, and 2 in Services and maintenance
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department. The sales and marketing employees in internal design and relaunch located in Skopje
are responsible for positioning, communicating and selling the product in that part of the country.
Elsar is currently looking for early-stage funding and strategic partnerships to execute the program.
The company plans to raise up to €5 million for bulding a plant in two rounds of financing during
Year 1, along with securing access to additional €1 million for the cash flow purposes, before
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making its program fully available to start to manufacture fireplaces. The preliminary rollout timing
is set September. Based on conservative financial projections, the company will become profitable
from early Year 2. The dual-pricing strategy generates solid net income and nearly eliminates the
downside risks. By Year 5-end , the €4 million investment will produce €5 million in cash flows, all
internally generated. The company can go public as early as Year 2. Should an IPO be undertaken
at Year 3-end, the financial standing of the company should support a market capitalization of
more than €10milion.
START-UP REQUIREMENTS
Legal €1500
Brochures €1200
Insurance €5000
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Start-up Assets
Long-term Assets €0
START-UP FUNDING
Assets
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Liabilities
Current Borrowing $0
Long-term Liabilities $0
TOTAL LIABILITIES $0
Capital
Planned Investment
Co-owner €2.5m
Co-owner €2.5m
Other $0
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Table X: Forecast sales and profits (for the next three years)
1 2 3
Sales Revenue 4m 4.5 5
Less Cost 1.5m 1.8 2.2
Gross Profits
2500000 2700000 2800000
(operating profits)
Less: Interest
1000000 1300000 1500000
Expense
Net Profits Before
1500000 1400000 1300000
Taxes
Less: Taxes 300000 280000 260000
Net Profit After Taxes 1200000 1120000 1040000
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1 2 3
Cash 300000 450000 620000
Marketable Securities - - -
Accounts Receivable 250000 380000 420000
Inventories 150000 230000 340000
Total Current Assets 700000 1060000 1380000
Land & Buildings 420000 420000 420000
Machinery and Equipment 450000 450000 470000
Vehicles 60000 60000 80000
Total Gross Fixed Assets 930000 930000 970000
Net Fixed Assets 232500 232500 242500
Total Assets 1630000 1990000 2350000
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Accounts Payable
Total Current Liabilities
L / T Debt (Inc. Financial Leases)
Total Liabilities
Common Stock
Retained Earnings
Total Equity
Total Liabilities. & Equity
Table X:
1 2 3 4 5 6 7 8 9 10 11 12
CASH REVENUES
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Utilities Payments
TOTAL CASH DISBURSEMENTS
RECONCILIATION OF CASH
FLOW
OPENING CASH BALANCE
ADD: TOTAL CASH REVENUES
DEDUCT: TOTAL CASH
DISBURSEMENTS
CLOSING CASH BALANCE
Table X:
A. Fixed costs per month (or B. Average Gross profit Break even sales revenue**
year) percentage (expressed as (A/B)
decimal) = Gross profit*/
Sales
*Gross profit=Sales-COGS
**minimum sales to survive
Breakeven Point = Fixed Costs/ (Unit Selling Price - Variable Costs)
Table X: Ratio analysis (past three years and forecasted three years)
RATIO ANALYSIS
Profitability ratios
Gross Profit Margin (>)
Operating Profit Margin (>)
Net Profit Margin (>)
Return on Total Assets (ROA)
(>)
Return on Equity (ROE) (>)
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Liquidity ratios
Current Ratio (2-3)
Quick Ratio (1)
Leverage ratios
Debt Ratio (<)
Debt-to-Equity (<1)
Times Interest Earned (>>1)
Activity Ratios
Inventory Turnover
Average Collection Period
Fixed Asset Turnover
Total Asset Turnover
X. RISK ANALYSIS
Possible Threats:
1. Competitive risk. Carefully analyze the number and power of our competitors. Having more
than a couple of large companies that have bigger market share is very big threat for the
company.
2. Financial risk. If Total revenue is negative the company will be in risk to pay all depts.
3. Technology risk. In a situation when the competitors are starting to use new technologies, our
company may run into unpredictable performance or manufacturing problems.
Other risks that ELSAR Company might face with are: Price wars/competitors prices,
Substitute products, unusual change of the raw materials and change of quality of the products.
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REFERENCES
APPENDIX 1:
APPENDIX 2:
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