Nature of the Business
I plan to start a tropical fruits canning company to take advantage of the growing interest in the exotic fruit juices in the United States. The company’s name will be Tropifruit Foods Inc. and will be based in Detroit, Michigan. The company line of business will be the processing and packaging of raw edible exotic fruits native to tropical zones like atemoya, Atherton raspberry, bacuri, black mulberry, Brazilian guava, acai, and acerola. The company will also try to diversify its product line in future by venturing into the manufacture of cereal-based food products with fruit flavors. The uniqueness of Tropifruit Foods is the emphasis on exotic fruits whose flavors are unknown in the American market. The fruits will bring processed using the latest canning technology like use of bioplastics and antimicrobial systems (Martin-Belloso & Fortuny 2010).
Value Chain
The value chain of this company will be designed to increase efficiency, cut the cost of production, increase the profit margins, and address the evolving customer needs. The design stage will involve carrying out a market research to learn about the latest flavors and customer needs in relation to the cost-effectiveness. The production will start by sourcing fruits and canning materials from the source so as to eliminate intermediary costs. The large-scale fruits farms which produce these raw materials will be contracted to supply them at a cheaply negotiated price. The designs of the canned products will be adhered to the letter to minimize wastages. After production, the advertisement of the products will be done online through a massive social media campaign. Immigrants from tropical areas will particularly be targeted. This is because of the nostalgia associated with the consumption of tropical fruits most of which are no longer available in the US market. This approach will be complemented with billboard advertisements and social influencers to influence potential customers towards Tropifruits products. The marketing will be also being done online and complimented with designated retail points. These points’ interiors will be decorated in such a manner as to enhance the brand’s image and increase the passers-by curiosity. There will also be a home delivery at a customer’s convenience. These canned fruits will be offered at relatively cheaper prices than the competitor’s brand in order to undercut them out of business. This will ensure that the company sells more and hence bigger profit margins. The company will adopt a policy of mass production of packaged fruits in order to reap the benefits of economies of scale. Mass production cuts the costs of production (Diop & Jaffee 2005).
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Budget and Budgetary Review
The company will adopt a master budget which will incorporate all the departmental expenses and projections into one document. It will be a holistic aggregate of all projected activities in a fiscal year with their attendant expenses. It will include the projected expenses in the following components: production and design, advertising, sales and marketing, finance and accounting, human resource and administration. It will utilize a bottom-up approach where heads of departments will be required to make projections of their expected expenses in a fiscal year and then this will be aggregated. The budgetary review process will include the following steps:
First acquiring useful data for the expenses made so far. This will involve strict book-keeping so as to track each and every expense incurred in the budget.
Examine the data closely to determine what amount of money went where and whether each department/activity met/surpassed its allocated funds.
Trying to redistribute capital by reducing the amount allocated to the over-budgeted activities, while transferring the same to under-budgeted but crucial processes.
Looking for areas of improvement in terms of minimizing wastages. Money allocated to non-essential expenses could be reduced. Salaries spent on redundant employees could be saved and this manpower retrenched.
Searching for supplementary sources of funding the budgeted expenses. This could be done by sourcing investors or loans.
Restructuring the budget by streamlining it in line with the budgets of competitors.
Benchmarking and its Benefits
Benchmarking is a comparative approach where a company’s performance is gauged either using an internal or an external standard, with an objective of evaluating the overall efficiency of its operations, processes, production, marketing, and design. Tropifruit Foods Inc. will utilize specific benchmarks namely competitive, internal, generic and functional benchmarks. Competitive benchmarking will involve comparing the company’s production, sales, and delivery process with competitors like Pinnacle Foods and international food firms like Nestle Brazil in order to come up with an understanding of how they conduct their business processes. Internal benchmarking will constitute coming up with own internal standards as a company in terms of annual targets. Each department will be assigned its target and there will be reviews to evaluate internal performance.
Generic benchmarking will be similar to the internal one in that there will a critical review of what each and every member of the human resource contributes to the overall revenue of the company. Redundant employees will, therefore, be laid off. Functional benchmarking will involve gauging this company’s performance with firms in the related line of business but which Tropifruits Foods will not be competing with for the time being. This includes dairy firms like Great Lakes Cheese Company.
One benefit of using these benchmarks will be the acquisition of insight into the business performance of Tropifruits Foods vis-à-vis that of our rivals in the market. They will help the company gauge its position in the market. They will enlighten this company about the nitty-gritty of the best products and sales practices already developed by the fruits processing world so that Tropifruits does not have to start from scratch. This insight gives a startup fruits company a head start (Somogyi & Hui 1996). The internal benchmarking will help the company director implement performance-contracting, therefore, holding the employees liable for their inefficiency. More importantly, they will help the company identify areas of improvement and innovation in the fruits industry thereby increasing future business opportunities. They will also help the company standardize its business processes and inform the directors what needs to be done to make this business venture a success.
Costing System and its Challenges
Tropifruits Foods will use a standard costing system due to its convenience. It is convenient as it saves time by coming up with estimated costs in a production process to replace the actual cost. This is congruent with food processing business (Woodroof 2012). Since it would take time to get the actual cost for accounting and budgeting purposes in the face of inflationary pressures, it is prudent to record the estimates and keep on revising the projected cost. One major challenge is the inherent assumption in this system that supposes that prices for items do not change in the short-term and that there is no need to update them during that time. This might be a fallacy as inflationary pressures in times of global financial crises mat destabilize prices of raw materials even in the short-term. Another challenge is that this estimation cannot apply when contracting raw materials from suppliers. Actual costs will have to be used.
In a nutshell, tropical fruits processing industry is an under-tapped market and Tropifruits Foods will try to fill gaps in the market by employing an innovative business approach. Its exotic tropical products will change how fruits are consumed in the US market.
References
Diop, N., & Jaffee, S. (2005). Fruits and vegetables: global trade and competition in fresh and processed product markets. Global agricultural trade and developing countries , 237- 257.
Woodroof, J. (Ed.). (2012). Commercial fruit processing . Springer Science & Business Media.
Somogyi, L., Barrett, D. M., & Hui, Y. H. (Eds.). (1996). Processing fruits (Vol. 2). CRC Press.
Martin-Belloso, O., & Fortuny, R. S. (2010). Advances in fresh-cut fruits and vegetables processing . CRC press.
