MSD Construction Business Plan Analysis

MSD grammatical device Business Plan AnalysisThe abbreviation of MSD line of descent plan knowledgeabilityThe paper is near MSD Construction Company own by an Omani citizen Mr Mujahid Al-Zadjali.it specialized in providing function including cover fabrication, utilizing framework, concrete placement and excavation. It focuses on commercial as well as residential clients. It aims to occasion the leading contractor by providing mettlesome persona service with affordable prices.This paper is about analyzing of the course plan for MSD. It volition evaluate whether the plan is suitable for the plastered to achieve their long-term goals.This assignment volition be organized as follows. First, it will highlight the owner-personal type and the skills he possessed. Then, the organizational building and counseling skills and duties will be evaluated. Later on, the troupe product-market will be discussed. It as well will discuss about its market and pricing strategy. Next, it will focus on competitive environment and their strategies. Then, the monetary execution of instrument of MSD will be analyzed. After the epitome of financial statements, the paper will analyze the SWOT of the company. In conclusion, at that place will be a brief summary about the case and recommendation for MSD to improve their line of priminging plan.1.0 Personal Quality of the owner animal trainerMr. Mujahid AL-Zadjali is capable to run his own construction employment as he has 5 eld convey in the field. In addition, he possesses a variety of skills that argon required in running this type of the organization, such(prenominal) as marketing, time management and represent engage skills. In addition, these will help assists him to solve the crises in future. The business plan had non mentioned whether he has IT skills which are important for each(prenominal) business. base on the business plan, the owner is willing to hold liable for all debts and obligation link u p to company. He alike established long-term planning for the organization. These all indicate that he is self-motivated and emotionally strong to face all the business risks. Also, it means that the owner definitely desires to issue his business.The objectives of the enterpriser are to develop infrastructure for long-term planning and to achieve regular profit stratumly. Furthermore, it aims to offer up quality services at affordable cost to its clients. A nonher objective of the company is to provide health and gumshoe work environment to its employees.The owner of the firm has adopted leadership style establish on creditworthy and mutual respects in the midst of the staff. This is one of the ideal characters for this construction company as on that point are many technical works expect to be performed by specialized employee.2.0 The Management TeamThe business already had management team which consists of two administrative assistant and general autobus. However, there are non sufficient numbers of management in the team. It should accommodate human resource manager to accomplish the natural rubber requirement on the job and high quality of services. The company should also appoint stock manager to manage in-coming and out-going materials for the constructions. In addition MSD did not appoint proper public treasury for preparation of the financial statements as it kept in position the administrative assistant with marketing and cosmos relation background. It should look at manager that is specialized in accounting and finance.According to the management team that mentioned in the business plan arrest adequate mix of outside experience. For example, Ms. Jaya is an administrative assistant has excellent organizational and managing office crisis skills with 25 socio-economic classs of experience in accounts payable and receivable. Except for Mr. Varma which has seven years experience in marketing and public relation that which is not adequat e for accounting job.The company set a goal to earn an infrastructure for organizational structure but seems it does not applied yet proper organizational chart. It did not mention a detailed organizational structure and who should report to whom. It should clearly set up structure with staff position and duties.The business plan has not mentioned if there is any delegation of authority between staff. They have to plan a proper delegation strategy and to inform staff about it in order to be aware of the responsibilities that are transferred to them.There are no monitoring procedures to check the performance of the employees. The company had to have performance measurement to evaluate how the staffs perform in their duties.The organization philosophy is based on job responsibility and mutual respect between staff. The staff should follow this organization goal to achieve the companys common goals and objectives.MSD consider its employees as it provides health and safety work enviro nment within the concrete industry. barely, it trains its employees adequately on the industry work. Although these are satisfying staff, there is probability of cost increasing of the company especially over doubtfulness expenses.3.0 Product-Market OfferingThe construction company had set target market by provision its services to both commercial and individual customers. It provides road construction and dirt work for commercial customers. It also provides house slabs and driveways for residential houses. Moreover, it provides concrete fabrication services for both residential as well as commercial customers.The business plan although highlight the services that provided to clients, it did not mention the types of services that are favorite(a) by the clients. It should have a detailed investigation of customers needs to satisfy their requirements.MSD adding-value in their products through provides authoritative benefits to its clients including solid foundation, long lasting a nd safety and high quality products with cost-effective prices. Therefore, the clients can enjoy active at their house and feel safety.According to the statistics in business plan the demand of single-family units has been change magnitude by 12% and 1.5% for multi-family units in 2001. This indicates that there is market space for MSD products and services. However, the statistics are out of date and the company should avow only on the recent data.The firm has knowledge of the industry and competitors as it knows that the market is in growth position and the competitors strength and weaknesses, such as Julfar and Bahwan Company. These all will assist firm in having bulwark over against any answer by the competitors.The products and services of the firm are well-constructed and durable with high quality but at reasonable price. Therefore, it leads to low maintenance requirements. In addition, it ensures that their products are saved and approved by muscadelle Municipality and Ministry of Electronic and Water Resources forrader providing to customers. This indicates that the company has shown the value of their products for prospect customers.Bahwan and Julfar are well known smear with many years experience in construction services. They have an exemplary skill in customer relation management which enables them to accommodate their clients. Besides that, they have marketing skills and database resources that create obstacles to MSD to become market leader.Construction Company is trying to stay close to customers by gathering all its services in head office (AL-Khuwair) and it provides 24 hours call centre as a facility for customers if they face or to kvetch about any problems.In tight economy and high competition, MSD planned to design a crotchety strategy to keep the cost at reasonable level with high quality of products. It also verifies calls in accordance to their circumstances and then transfers these particular calls to proper section. It ca n be cost leadership first off by attempt to gain more market share than its competitors. Then, the cost will be automatically reduced by distributing fixed cost in wide range of products.4.0 Competitive EnvironmentBased on business plan there are no indicators of whether some of elements will affects the construction industry, such as economic stability and customer needs.MSD firm had collected only some information regarding to its competitors. This include as follows* Operating method. The competitors using high quality services with reasonable price. These prices will gradually subside up to the underway market price without reducing in quality.* Market strategies. In order to retain their clients, they hired customer relation management for this purpose.On some other hand, MSD did not find information related to competitors including size and profitability. It should get some statistical data about the competitors profit, their market shares, number of employees, number of ramose and so on.The entrepreneur did not identify of the future marketing mix strategy of the competitors. It also did not investigate of whether the rivals have planned to develop new products for the future. The companys objective if the competitors develop new products or provide new services. It might be the latest one to possess these products or services and these possessions might already reach at their maturity level. MSD should at least try to gets some information about the competitors (through analysis current market strategy of the rivals to predict its future plan) in order to find proper reaction against its competitors to keep their objectives achievable.The company did not have a unique resources that makes it difference from the competitors to attract clients. It should have something that allows them to be differentiating from other. For instance providing free maintenance after gross revenue.5.0 Financial Performance* Financial Statements figuresThe analysts fou nd certain geological faults in the MSD financial plan. In its projected income statement the descend of retained profit that desired by MSD is aforementioned(prenominal) as the break even. Therefore, the firm should make more profit to achieve its target. Moreover, the retained profit for the year 2007 was wrongly calculated. The amount after deducting provision for tax and legal reserve should be R.O 21,000 instead of R.O 42,600. This error affected the rate of some ratios like net profit and ROE.In projected balance cerement of the firm two issues were found. First, the fixed assets were relatively low. The companys fixed assets balance should be higher due to strained machinery and building that it possessed. If we assumed that most of its fixed assets is in form of leasing, it did not mention in the F.S. secondly, in 2008 the F.A was significantly low compare to previous years.About the projected cash flow, there is one luxate has deducted. The advance pre-payment have to be nil instead of negative balance of R.O 5,000 as it is constant either year.The business plan also includes the calculation of ratios. In calculation of interest cover, MSD did not mention the amount of interest or the amount of loan that will enable it to calculate the interest. There is a financial charge in income statement but it represents beside interest other items, such as transaction fees and cost of credit. Thus, it will mislead all the stakeholders who depend on the statements.* Financial ratios analysisHowever, the analysis of the ratios was based on the given statement except for 2007 where it calculated after the amendment of net profit.a) Performance ratioReturn on shareholders funds.20062007200822.5%14%29%The profit addressable to owner had been decreased in 2007 by 8.5% but it increase again in 2008 15%. This is because the profit after tax decreased in 2007 and then change magnitude again in the following year. According to the plan the net profit is fluctuat ed every year. This indicates that company does not have adequate plan for uncertainty.Return on capital employed20062007200825%33.33%35%ROCE had been increased continuously every year. It is because the profit sooner interest and tax increased yearly. This mean the company note is continually improving and willing to pay its debts. However, long term debt had not taken into account as it was not available in projected balance sheet. This lead to in faultless identifies the percentage of profit available to pay its debts.b) Profitability ratioGross rim20062007200834.8433.48%33.33%The projected income statement shows that gross profit has been approximately decreased from 2006 to 2007. This is due to the increasing in cost of sales and the revenue did not increase at the same level while it remained almost same in 2008. MSD should investigate the reason of such decreases as it whitethorn affect he net profit in futureNet profit margin20062007200817.42%18.52%19.40%Although the gro ss profit had been decreased, it can be noticed that the net profit is increasing every year. The reason for increasing is operating expenses has been increased at acceptable level which let retained profit to contrive the increasing in sales revenue. The total expenses were increased from 2006 to 2007 by 1.13% (27,000/24,000) whereby retained profit had increased by 1.58% (42,600/27,000) for same period.c) Asset efficiency ratioDebtor turnover200620072008177 age143 days155 daysThe debtor array period has decreased in 2007 by 34 days and it increased again in 2008 by 12 days. However, it is still considering high. (Further explanation in III)Creditors turnover20062007200874 days88 days76 daysAverage payment period to MSDs suppliers is 79 days whereby average collection period is 158 days. Company might face problem in cash flow because it pays to supplier before receiving from customers. It should make sure that the money collected earlier than the payments although customers may not like it otherwise the firm will suffer to pay to its suppliers. If this situation is continued, the suppliers may not renew the contract or may ask the firm to pay on delivery.d) Liquidity ratioCurrent ratio2006200720085.3614.1814.781The current ratio of the firm has been decreased in 2007 and 2008 compare to 2006 but it is still at acceptable level. This is probably because the current liabilities in 2006 are less(prenominal) than in 2007 and 2008. MSD attempted to ensure that its current ration did not fall below 41.Quick ratio2006200720083.7912.7613.271Again, the current liabilities in 2006 are more than in next two years. It was noticed that the inventory was less in 2006 than the inventory in following years. MSD should ensure their inventory level should not increase get along otherwise it might face difficulties in cash flow.e) Gearing ratioInterest cover20062007200821 propagation26 time29 timesThe interest coverage of less than three times is considering low. It can b e seen that the interest cover is increasing every year from 21 times in 2006 to 29 times in 2008 which is good news to company. The reason behind this increasing is the profit before interest and tax is greater in 2007 and 2008 than in 2006 regardless of increasing in total expenses.* sensibility analysisThe following table will help to calculate the sensibility to profit.200620072008R.O000R.O000R.O000Sales155230cccLess Material cost(101)(153)(200)Less Labor cost(8)(9)(10)Contribution466890Less Fixed cost(16)(18)(20)Net profit305070I) Calculation of sensitivitySince the plan had not given clear figures for calculating sensitivity of the project, we had assumed the following* Cost of sales had been taken as a material cost.* Staff salaries as a labor cost.* Other expenses had utilize as fixed cost.200620072008Profit to sales19%22%23%Profit to material30%33%35%Profit to labor375%555%700%Profit to fixed cost187%278%350%It had found that sales were the worst percentage among the ot hers. Therefore, it was more sensitivity to profit. It means that the sales will affect the profit more than other element if it decrease or increase.II) Calculation of BEPProfit to BEP (in value) = sales*(F.C/contribution)200620072008R.O54,000R.O61,000R.O67,000The company had to sell an average of R.O54000, R.O61000 and R.O67000 in 2006, 2007 and 2008 respectively in order to cover all of its expenses.III) Margin of safety20062007200865%73%78%The company can allow its sales to decrease by 35%, 27% and 22% in 2006, 2007 and 2008 respectively without incurring any losses.6.0 SWOT analysis of MSD construction* StrengthMSD provides quality construction services by providing an honest, fair working relationship with residential and commercial clients, subcontractors and sales people. Since the biggest concern within the concrete work industry is the health and safety of its employees as well as the customers. Also, it developed a encyclopaedic infrastructure designed, long term plannin g with a safety policy and secure company. They did good analysis about the strength and weaknesses of their competitors. The company management has different facilities which enhance them to perform better such as, experience and qualification in different areas in the market started from the owner. The ability of company to provide superior quality services at passing competitive and guaranteed price.* WeaknessesThere is no clear organizational structure of the company. They dont have a famous brand name yet. Also, they focus only in few department and duties. Moreover they did wrong calculation in different areas like in concrete work and in single-family caparison construction. In order to overcome these weaknesses, MSD should create additional departments, such as IT and human resource department. Furthermore, it should hire financial analyst to analyze market accurately.* OpportunityThe owner and his management team are highly experienced and qualified in construction work. The growth in population, demand increase in construction and increase in government projects will help them to survive. Also, competitors have high overhead expenses, bad contractual terms with its key suppliers that often delay particular project and because of that they are losing some of their strategic union with significant firms.* ThreatsMSD faced strong competitors with strong capital and shares, which they already in the market and they have high construction services and distribution quality at very competitive price. The competitors have exemplary skills in customer relationship management and leading marketing skills with efficient database management. In pricing strategy the competitors seems to be the expert in the field by offered reasonable price with high quality for a year and then slowly moves it down to compete with current price in the market. Government regulation to book omanization which could lead to high cost and the labors May not have a good experience. MSD can unite with other construction company to get extra capital for competing with competitors. It can build its own IT department to process the data efficiency. It should have proper procedures for recruitment so it can minimize after handicraft cost.Conclusion and RecommendationThis paper had analyzed the appropriateness of MSD business plan. There were some issues against the plan that is inevitably to succeed the business. Some of importance investigation had not carried on, such as competitors strategy. On other hand, there were some incomplete statements and improper collection of market statistic. Moreover, the firm F.S had included errors that would affect its financial goals. In addition, the company did not have PEST and Porters five forces analysis of the industry.These missing statements will lead to business failure. If it is plan to propose their business plan to the any of financial instruments to seeking loan there is effectiveness of rejecting this proposal .RecommendationMSD should review some of its plan, such as market statistic and attempt to get more accurate data.Beside the correction of data, it should also collect significant data like competitive market shares, profit and the size. In addition, it should collect information about competitors Porters five forces.It had found that some of the management holds inappropriate position in accordance to their qualification and experience. The firm should review this and try to appoint right person for the right job.It should also hire some additional managers in management team, such as human resource manger and stock manger to implement the companys strategies.