Drexel University

Business 102-004
Winter 2015

Brotherly Love Bikes

Business Plan

CEO Zion Aregahegn

CFO Laura Costes
CSO Anthony Iacono
CMO Jason Narine
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student handbook. By affixing this statement to the title page of my paper, I certify that I have not
cheated or plagiarized in the process of completing this assignment. If it is found that cheating
and/or plagiarism did take place in the writing of this paper, I understand the possible
consequences of the act/s, which could include, but are not limited to a ZERO for this assignment
and a failing grade for the course.

Table of Contents
I.
II.
III.
IV.
V.
VI.
VII.

Executive Summary...3
Mission Statement..4
Situation Analysis...5
SWOT Analysis...8
Business Resources.10
Business Strategy.12
Financial Projections and Budgets.14

I. Executive Summary

Brotherly Love Bikes is a Philadelphia-based bicycle manufacturing company

founded in 2015. With a management team comprised of CEO Zion Aregahegn, CFO
Laura Costes, CSO Anthony Iacono, and CMO Jason Narine, Brotherly Love Bikes aims
to produce quality and reasonably-priced bicycles.
As Brotherly Love Bikes is in its first year of production and is a relatively new
company, several external forces must be considered. When pricing products, it is
imperative to take into consideration the prices of competing firms. The state of the
economy has the potential to affect financial and production decisions that the firm
makes. Brotherly Love Bikes must be aware of technological advances in order to take
advantage of opportunities to increase efficiency and reduce manufacturing costs.
Government laws and regulations will be taken into account in order to avoid illegal
conduct and possible lawsuits. Sociocultural factors such as consumer lifestyles and
current events will need to be considered when choosing how to promote products.
Future success of Brotherly Love Bikes is heavily dependent on the
managements understanding of the firms strengths, weaknesses, opportunities, and
threats. Strengthssuch as facility locationand weaknessessuch as a lack of
expansionare considered to be internal because of the firms ability to control factors
that make the firm strong or weak. Factors that the firm cannot controlsuch as an
opportunity to capitalize on new fads, or the threat of competitionare considered
external because of the firms inability to control such factors.
Brotherly Love Bikes has several main objectives it is planning to accomplish. By
Year Three, the firm plans on increasing its shareholder value by 35%. Brotherly Love
Bikes aims to fund its release of a line road bicycles through the profit generated from
its mountain bicycle sales, hence the firm will need to generate a large enough profit
from the sale of its mountain bicycles. By the time the road bicycle is introduced,
Brotherly Love Bikes aims to be in the top fifteen percent of firms in terms of high
shareholder value. By Year Four, the firm plans to issue dividends to its shareholders
only if all other objectives have been accomplished. This is to ensure the firm has the
necessary funds to be able to issue dividends and avoid an unnecessary liability.
The main financial components that were taken into analysis are the firms threeyear projections and its budget. Over the next three years, the firm forecasts an
increase in sales revenue, gross margins, and cash as well as a decrease in
manufacturing costs and cost of goods sold. Brotherly Love Bikes plans on allocating
most of its promotional budget towards advertising and less so on public relations. With
an increase in brand awareness over time, the firm will need to allocate less and less of
its budget on promotion.
The success of Brotherly Love Bikes will depend on the managements ability to
use its analytic and strategic skills to make careful and calculated business decisions.
The choices collectively made by the CEO, CFO, CSO, and CMO will ultimately be
made with the firms goals and objectives in mind. By pooling skills and using resources
efficiently and effectively, Brotherly Love Bikes will become Philadelphias primary
bicycle manufacturer.

II. Mission Statement

At Brotherly Love Bikes, we are committed to making transportation affordable

and environmentally-friendly by producing quality bicycles.

III. Situation Analysis

A. Introduction to Brotherly Love Bikes

Brotherly Love Bikes is a company based in Philadelphia with an overseas
productions facility in Singapore. The companys main focus is providing a quality
bicycle at a fair price. Shareholder satisfaction in their investments in Brotherly
Love Bikes is a top priority. Brotherly Love Bikes plans to out-produce its
competition and to provide products to the entire market. The company is
focused on being the leader in the bicycle market.
B. Competitive Forces
The bicycle market is oversaturated with producers. The primary
competitive force facing Brotherly Love Bikes is competitors producing similar
bicycles. The company needs to find its niche, setting itself apart from the
competitors, in order to increase profits. If not, the firm will risk losing potential
income and and delay expansion.
In addition to direct competition, Brotherly Love Bikes faces indirect
competition. This includes companies that provide alternative goods and services
pertaining to transportation. These competitors can sell products ranging from
skateboards, motorcycles, and automobiles. Brotherly Love Bikes indirect
competition extends to public transit services such as shuttles, buses, and trains.
Similar to the challenges presented by other bicycle companies, Brotherly Love
Bikes aims to develop a way to offer a product that will capture the consumers
interests.
Another competitive force is brand awareness. An increase in competitor
brand awareness could result in a decline in demand for the products offered by
Brotherly Love Bikes. The company must employ effective advertising techniques
in order to establish itself as a well-recognized and respected name in the bicycle
industry.
As this firms competitors become more technologically advanced, there
is a possibility that the company will fall behind in sales revenue. The company
must continually update and adapt to the changing industry technologies in an
effort to stay ahead of its competitors.
C. Economic Forces
Economic forces affect the business as a whole when dealing with
monetary values such as sales, profits, and net revenue. These aspects can
initially make or break the company. An example of an economic force is the
financial state of the economy. If the economy is in a recession or depression,
sales are subject to drastic fluctuation. As a result, Brotherly Love Bikes would
have to adjust and reconfigure its strategies and goals.
Inflation is another economic force that could have a negative impact on
the company. Inflation may lead to the firms products being considered
overpriced, which would result in a decrease in sales. The firm would have to

adjust its production levels and sale price in order to counteract the effects of
inflation.
Fluctuation of price and cost of materials used in production could
negatively affect product sales and sales revenue. The management team will
be consistently monitoring cost and prices to make sure product prices are stable
and the cost of production is as low as possible while maintaining the quality of
the product. The firm will take all actions necessary in order to avoid drastic
increases in product prices.
D. Technological Forces
Brotherly Love Bikes must be able to adapt to the technological forces
associated with the bicycle industry. Developments in the machinery used in the
assembly process is one such technological force that must be anticipated. The
company is determined to continuously improve efficiency and decreasing waste.
Without remaining aware of technological advances in the realm of production,
the firm will fall behind competition with a resulting loss in potential consumer
sales.
An additional technological force that Brotherly Love Bikes can anticipate
is an evolution in consumer preferences regarding bicycle designs. As
consumers become increasingly tech savvy, there will be a demand for electronic
components on bicycles. Such components include, but are not limited to, GPS,
sound speakers, and bluetooth connectivity. In order to stay competitive and
profitable within the bicycle industry, Brotherly Love Bikes will have to
acknowledge and capitalize on their target markets preferences.
E. Legal and Regulatory Forces
Legal and regulatory forces include governmental acts to ensure product
safety and legalities. Because the firm is importing its bicycles to the United
States from Singapore, the firm will be monitoring the state of tariffs and import
regulations.
Certain materials used in production may be subject to regulation. In
response to this, the company will need to upkeep a list of approved materials
that will be used in the production and shipping of its products.
Other regulatory factors to be considered are pollution and waste. The
firm will aim to keep these factors low in order to gain public approval of its
company practices, and meet regulations within the countries with which the firm
interacts. The public perception of Brotherly Love Bikes is vital, which is why the
company must be aware of how ethical its practices are.

F. Socio-Cultural Forces

Socio-cultural forces involve a combination of social and cultural elements

that affect purchasing behaviors. Brotherly Love Bikes will need to take into
account the views of its consumers in order to be a successful firm.
Consumer lifestyle is a socio-cultural force the firm must consider when
designing and manufacturing bicycles. The consumer chooses whether they are
purchasing the bicycle for recreation or transportation purposes. The firm must
be able to create products that meet both of these customer needs.
Consumer preferences are external factors to be accounted for.
Consumer preferences affect how the firms bicycles will be designed, priced,
and ultimately used by consumers. Bicycles will be manufactured with quality
being a main focus.
Social organizations and events will be another force in Brotherly Love
Bikes production. The company must be able to reach out to surrounding
communities and provided excellent services local organizations. This firms
products will be sure to meet the needs of potential consumers.

IV. SWOT Analysis

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A. Strengths
1. Location
Our companys urban location gives us access to many retailers
around the city. This is an internal strength because location is a choice
made and controlled by the company. We have the ability to choose
location on our own terms.
2. Shared Ownership
Multiple partners controlling the firm makes it easier for our diverse
skills to be combined and used effectively. This strength is internal
because it is within the firm and affects how the company is run.
3. Product
Many people in urban areas choose bicycles as their form of
transportation. Our bicycle production gives us an internal strength
because we see the demand for the product and choose to satisfy it.
B. Weaknesses
1. Control of Company
Having multiple partners may lead to conflicts in how the company
is managed because of differing opinions and management styles. This is
an internal weakness because our company has control over how many
managers there are.
2. No Expansion
Because we only have one manufacturing plant, we are limited to
the amount of revenue that our single company can generate. If we
expanded, we could gain a larger revenue pool. This is an internal
weakness because we have control over whether or not to expand our
company.
3. Deadlines
Although we are not anticipating this, it is possible that our
company may not meet certain deadlines set (each rollover period). If this
were to happen, it would be an internal weakness because it is up to our
company to keep track of and complete certain objectives before each
deadline.

C. Opportunities
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1. Unsatisfied Demand
If the situation arises in which the market demands a non-existent
product, this gives our company the chance to launch a new product line
and generate more revenue. This is an external opportunity because our
company does not control consumer demand.
2. Biking Event
An event such as a bicycle race or marathon would certainly
increase our brand awareness. Increased brand awareness will could
potentially increase demand, and therefore, production. This opportunity is
external because our company does not determine when consumers will
need more of our product.
3. Fads and Trends
If bicycle riding rises in popularity, consumer demand for bicycles
will increase. This would give us the opportunity to satisfy that demand by
producing more bicycles. Because our company does not control
consumer trends, this is an external opportunity.
D. Threats
1. Competition
If our competitors acquire new technology that allows them to
produce greater quantities of products at a lower cost, they could
potentially run our company out of the market if we are not able to beat
their lower prices. This is an external threat because our company does
not control our competitors choices.
2. Government Regulations
If the government imposes regulations that control how much of a
product our retailer can supply, it may reduce our companys output.
However, this is unlikely to happen in the United States because of our
relatively free market. However, laws and regulations are factors on which
Brotherly Love Bikes must remain up-to-date. This is an external threat
because we do not directly control the decisions the government makes
on market regulation.
3. Change in Consumer Trends
Because trends are known to change over time, it is possible that
the current market for bicycles may decline and shift towards another form
of transportation. This is an external threat because our company cannot
control trends among consumers.

V. Business Resources

A. Human Resource Experience and Expertise

1. Zion Aregahegn, Chief Executive Officer (CEO)
Zion Aregahegn is the CEO at Brotherly Love Bikes. Under Ms.
Aregahegns guidance, the company succeeded in clearly identifying its
strengths, as well as places for improvement in the bicycle industry.
These strengths and points of improvement (highlighted in Section IV) will
prove to be crucial in determining how successful the company is against
competing firms.
In addition to identifying Brotherly Love Bikes strengths and points
of improvement, Ms. Aregahegn also put into perspective the opportunities
and threats (highlighted in Section IV) the company will face. The CEO
has made it clear that the firm must capitalize on every chance the
consumer market offers to the company in order to maximize profits. In
regard to threats, the CEO has also noted that the firm must be able to
adjust to the critical changes in the bicycle industry in an instant. By doing
so, Brotherly Love Bikes should be able to maintain its forecasted
increases in profits.
2. Laura Costes, Chief Financial Officer (CFO)
Laura Costes is the CFO at Brotherly Love Bikes. As the head of
the financial department, Ms. Costes was responsible for forecasting the
companys growth in the next three years. Through the use of key reports
(Industry Benchmark, Market Information, and Products) and careful
calculations, the CFO has projected a desired financial outline that
envisions Brotherly Love Bikes exceeding revenue, profits, and
shareholder value year after year (highlighted in Section VII). Additionally,
Ms. Costes has also figured out the necessary expenditures the company
needs to make in order to function efficiently while generating profits.
3. Anthony Iacono, Chief Strategic Officer (CSO)
Anthony Iacono is the CSO at Brotherly Love Bikes. As the head of
the strategic department, Mr. Iacono is the companys key component in
planning ways for the company to prosper in the bicycle industry. Through
his extensive knowledge regarding unfavorable situations the company
will face (highlighted in Section III), the CSO provides solutions to how the
firm can adjust to such circumstances in order for Brotherly Love Bikes to
be prosperous. Furthermore, Mr. Iacono has formulated five clear
objectives (highlighted in Section VI) that the company will strive to
achieve in order to be the most profitable bicycle company in its industry.

4. Jason Narine, Chief Marketing Officer (CMO)

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Jason Narine is the CMO at Brotherly Love Bikes. As the head of

the marketing department, Mr. Narines responsibilities lie in the promotion
of the companys bicycles. The CMO has conducted his research through
the analysis of documents such as the Market Information Statement, the
Pro Forma Income Statement, and the Pro Forma Product Gross Margin
Report. Through this research, Mr. Narine has formulated a strategy on
how to allocate the firms funds effectively in order to attract a majority of
the firms target market (highlighted in Section VII).
In regard to three-year projections, the CMOs marketing strategies
will result in Brotherly Love Bikes generating a desirable rate of revenue
and profits. As the firms products gain exposure through various media
channels such as television, the Internet, and magazines, this company
will soon become a household name.
B. Financial Resources
1. Base Resources
When the management team took control of what is now known as
Brotherly Love Bikes, the company had a deficit of $3,018,962 in its bank
account. This indicated to the new management team that the previous
management had been drawing more money than the bank account held.
This deficit, or overdraft, has been confirmed to be available for financial
and operational costs. However, the firm hopes to eliminate the overdraft
in our newly acquired account in order to generate positive figures in the
following years of operation.
Brotherly Love Bikes has also received 150 bicycles from the
previous year that can be sold at any given price that fits the firms sales
strategy. Furthermore, it has been confirmed that the company has issued
one million shares of stock selling for $10.97 per share.
2. Equity and Debt Financing
In the future, should Brotherly Love Bikes require additional
funding, it will turn to equity financing rather than debt financing. By using
equity financing, the firm will be issuing additional stock to shareholders.
This will result in the strengthening of the companys reputation among
current and prospective shareholders. Brotherly Love Bikes will avoid the
unfavorable conditions that accompany debt financing, such as accruing
interest on loans over time.

VI. Business Strategy

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A. Market Strategies & Product Summary

The initial product line of Brotherly Love Bikes is that of the mountain
bicycle. For this line, the bicycles will be moderately priced and distribution will be
focused on sport stores. Advertising channels will primarily be through
magazines and television. Research shows these mediums as having the
potential to generate the most product sales. Public relations will not be a primary
focus for the mountain bicycle as it is understood that in the market, this channel
has minimal impact. Initial production will increase by 2000 units in year one
followed by a consistent increase based upon market changes in the following
years.
By year three, Brotherly Love Bikes will expand into the road bicycle
sector. The road bicycle be priced high with low levels of production. Advertising
will be concentrated in magazines and Internet. Distribution of the road bicycles
will be focused on bicycle stores. The market for road bicycles is highly
responsive to public relations, thus Brotherly Love Bikes will design a new public
relations strategy when the road bicycle is released.
B. Year Three: Increase Shareholder Value at Least 35% & Place within Top 15% of
Market Regarding Shareholder Value
Brotherly Love Bikes intends to increase shareholder value by at least
35%, and place within the top 15% of the market at the end of year three.
Primary focus will be paid to the companys resources on road and mountain
bicycles. Forecast and market guides will be utilized to identify where the
company budget will be localized each term: advertising, production, and retail.
The firm will be releasing the road bicycle in year four. The initial strategy
for the new product is to price it between $2,200 and $2,300 with production
levels between 3,000 units and 8,000 units. Approximately 30% of the budget in
year four will be invested into advertising the new bicycle to gain awareness in
the market.
The strategy for the mountain bicycle is to price it between $690 and $720
with production levels between 18,000 units and 24,000 units. Approximately
20% of the budget will be invested into advertising as the market is not highly
responsive to fluctuations for mountain bicycle.
By the end of the third year, the company should be ahead of its
competitors in the market provided it produces and follows the guidelines of the
market forecast. Through the data received in research, Brotherly Love Bikes
will be able to accurately produce enough bicycles to cover the market demand
and surpass its competition.
C. Year Four: Launch of the Road Bicycle with Funds Gained from Mountain Bicycle

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The firm intends to release a new road bicycle in year four. It is

understood that such an endeavor will cost $1 million. Costs to create and
develop this road bicycle will increase further when funds are allocated to its
production and marketing.
Necessary funds will be initially generated through the sales of the original
mountain bicycle. There is an expected cash budget of $2.9 million, which will
enable Brotherly Love Bikes to fund the new road bicycle.
The company recognizes that the line of mountain bicycles provides them
with the highest opportunity for profit. However, with the release of the road
bicycle, it is anticipated that profits should exceed $1.5 million.
D. Year Four: Dividends Issued
Brotherly Love Bikes intends to issue dividend payments to its
shareholders in year four. The company will finance the dividends through the
mountain bicycle. Initial dividend payments will not exceed $0.07 per share. The
actual amount will be determined by anticipated income that year, as well as year
fours budget. It is agreed that if the company has not achieved any of the
preceding objectives above, the payment of dividends to shareholders will be
delayed until the firm has better established itself in the market.
E. Year Five: Efficiency and Quality Above 85%
At Brotherly love Bikes quality and efficiency are key to a successful and
healthy business. Based on information gathered from market research, quality
must be at least 90% for the road bicycle. This quality percentage is greater than
the mountain bicycles, which require only 75%. We aim to have quality control
at or above 85% by year 5. From there, the plan is to gradually allocate funds to
quality. The initial sum of allocated funds will be $1.5 million in year five, and $1.6
million in year six.
Regarding efficiency, Brotherly Love Bikes will allocate $200,000 to
funding in year three, followed by $1.2 million for year four, and $1.5 million in
year five. The investment of funds in efficiency is anticipated to reach an
efficiency percentage exceeding 85% by year 6.
As previously stated, quality is crucial for road bicycle sales. For this
reason, a large sum of the budget in years four, five and six will be allocated to
improving the quality of our product, thus differentiating Brotherly Love Bikes
from our competitors.

VII. Financial Projections and Budgets

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A. Financial Projections

The spreadsheet and graph above provides insight into the Brotherly Love Bikes
base line figures and three-year projections. The forecast suggests that the companys
sales revenue, gross margins, and cash will experience a consistent increase over the
projected timeframe. In contrast, the cost of manufacturing and cost of goods sold is
expected to decrease over the projected time period.

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B. Marketing Budgets

The spreadsheet and graph above provide insight into Brotherly Love Bikes
marketing budget. The forecast suggests that the companys budget will focus primarily
on the advertising aspect of marketing, rather than on public relations. Advertising
through television and magazines will be the primary focus of the companys marketing
budget.

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