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Year 11 Business Studies

Small Business Plan

Proposed Business: Game Kingdom

Prepared by: Zyzz brahLast updated: 10th August

Contents Page

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1.0. Executive Summary -4- 1.1. Mission Statement -5- 1.1.1. Mission Statement influence -5- 1.2. Objectives -6- 1.3. Slogan -6- 1.4. Logo -7- 1.5. Location -7- 1.6. Ownership -7-1.7. Opportunity and strategy -8- 1.7.1. Game Industry Yearly Earnings -8-1.8. Purpose and importance of plan -9- 1.8.1. Steps in the planning process -10-1.9. Business Life Cycle -11- 1.9.1. Establishment -11- 1.9.2. Growth -12- 1.9.3. Maturity -12- 1.9.4. Post Maturity -13-1.10. Business Goals -13- 1.10.1. Financial Goals -13- 1.10.2. Social Goals -14- 1.10.3. Personal Goals -14-1.11. SWOT Analysis -15-

2.0. Operations Plan -17- 2.1. Product Description -17- 2.1.1. Game Consoles -17- 2.1.2. Game Peripherals -18- 2.1.3. Game Software -18- 2.1.4. Computer Hardware -19- 2.1.5. Collectibles -19- 2.2. Staffing Requirements -20- 2.3. Human Resource Department -20- Fig.2.3.1. Human Resource Cycle -20- 2.3.2. Acquisition -21- 2.3.3. Recruitment -22- 2.3.4. Selection -23- 2.3.5. Development -24- 2.3.6. Maintenance -25- 2.3.7. Separation -26-3.0. Marketing Plan -27- 3.1. Competition -27-

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3.1.1. Competitor influence -28- 3.2. Target Market -29- Fig.3.2.1. the Gaming Market -30- 3.3. Sales Forecasts -30- 3.3.1. First Year Projected Sales -31- 3.3.2. Second Year Projected Sales -32-3.4. Marketing Mix -33- Fig.3.4.1. the Marketing Mix -33-3.5. Product -33-3.6. Price -35- 3.6.1. Psychological Pricing -35- 3.6.2. Penetration Pricing -35- 3.6.3. Discount and Sale Pricing -36- 3.6.4. Meet the Competition Pricing -36- 3.6.5. Skimming Pricing -37-3.7. Promotion -38- 3.7.1. Print -38- 3.7.2. Radio -39- 3.7.3. Internet -39- 3.7.4. Billboards -39- 3.7.5. Shopping centre announcements -39- 3.7.6. Word of mouth advertising -40-3.8. Place -40-

4.0. Finance Plan -41- 4.1. Financial requirements -41- 4.2. Financial statements -42- 4.2.1. Revenue statement -43- Fig.4.2.2. Revenue statement -44- 4.2.3. Balance sheets -44- Fig.4.2.4. Predicted balance sheet -45- 4.2.5. Cash flow statement -46- Fig.4.2.6. Predicted Cash flow statement -46- 4.3. Importance and use of financial statements -47- 4.4. Financial strategies -48-

5.0. Bibliography -49-

6.0. Advertising catalogue and assessment sheet -50+-1.0. EXECUTIVE SUMMARY – BRIEF OUTLINE OF THE REPORT .

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This report concerns the establishment of ‘Game Kingdom’, a small business responsible for providing video game hardware, software, memorabilia, and collectibles. The business will allow Australians to import video games from all over the world, and in turn provide unprecedented service and knowledge of all things gaming related. Combining up to date products at negotiable prices, and custom-ordered software from around the Globe, ‘Game Kingdom’ aims to become a trusted and respected provider of video game products. As we as gaming consoles, ‘Game Kingdom’ will provide the newest and most powerful graphics cards and processors for computers, all at affordable prices. Areas and issues that will be covered in this report include:

Business description and ownership

Purpose of plan and situational analysis

Objectives and strategies

Description of the Product/Service

Staffing requirements

Market analysis and strategies

Financial forecasts

Implementing the strategies set out in this report will ensure the ongoing success of ‘Game Kingdom’.1.1. MISSION STATEMENT .

“To provide high quality video game products with impeccable service”

In order to achieve this mission, ‘Game Kingdom’ aims to maintain a culture of superior service, knowledge of products, and high standards.

1.1.1. Mission Statement influence on the way business is conductedThe mission statement plays an essential role in all operations of ‘Game Kingdom’, be it daily operations or long-term goals. In order to achieve the specified objectives of ‘Game Kingdom’, the

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way the business is conducted must be in a way as to allow the business goals to be effectively met. As a result, the standard of work and importance placed on quality and service, as spelt out by the mission statement, is crucial to ‘Game Kingdom’. If ‘Game Kingdom’ does not operate in a way as articulated by the mission statement, the business name will be severely affected and could ultimately lead the organisation to financial loss with an irreversible burden placed upon the business name. ‘Game Kingdom’ strives to exceed to become the top provider of video game products within Australia, and to do so, meeting and surpassing the fundamental purpose spelt out in the mission statement is crucial.

If ‘Game Kingdom’ is not meeting the goals set out in the mission statement, changes will need to be made to the way the business is conducted. Monitoring the business, both the public perception of it and financial success will make clear whether or not the business is achieving its mission. As a result, changes may need to be made to the way ‘Game Kingdom’ is conducted if it is not achieving its specified purpose. 1.2. OBJECTIVES .

P1.2.1 Becoming a respected and trusted businessP1.2.2 To continue seeking and maintaining community trust

and loyalty.P1.2.3 Develop employee training, skills and cohesion so they

can help achieve business goals, and have greater job satisfaction.

P1.2.4 Achieve Financial GoalsP1.2.5 To maintain and extend the customer base of the gaming

marketP1.2.6 To provide customers value for their dollar with

negotiable prices.P1.2.7 To promote the image of Game Kingdom in the

community and to the wider gaming, entertainment and electronic markets.

1.3. SLOGAN .

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The Slogan of ‘Game Kingdom’ is “Experience the Game”. This unique slogan presents a notion of curiosity looking into the broad world of video games. The slogan also entails a relationship between the game and the player, implying that there is more to the game than moving pixels on the screen, which is essentially the prime function of ‘Game Kingdom’.

1.4. LOGO .

The Logo of ‘Game Kingdom’, as seen above, is simple, and instantly recognisable. The sleek and silver-metallic look makes it eye-catching and thus making a great logo for the business.1.5. LOCATION .

‘Game Kingdom’ will be located on the ground floor of Carlingford Court, a shopping centre situated in the heart of Carlingford. In doing so, ‘Game Kingdom’ will be subject to direct competition with Electronics Boutique, a company also serving its main purpose by providing game hardware and software. ‘Game Kingdom’ aims to increase its customer base by providing unprecedented service, quality, and bargains. The customers of ‘Game Kingdom’ will come from Carlingford, as well as various neighbouring suburbs including Eastwood, North Rocks, and Oatlands. Due to the unique and special services of ‘Game Kingdom’ such as international game ordering, the business aims to reach an even further customer base.

1.6. OWNERSHIP .

The ownership of ‘Game Kingdom’ will be an incorporated partnership, consisting of;

Aziz Shavershian Joe Bloggs– Retired HR Manager of the F.G.C, (Fictional

Gaming Company). Joe also has past experience in running a business.

The benefits of partnerships are;

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The ease of establishing the business. Access to finance is easier in comparison to sole-trader. Individual partners can share the task of running the

business. Can be tax advantages in partnership. Adds required expertise to management. Adds capital.

1.7. OPPURTUNITY AND STRATEGY .

‘Game Kingdom’ will be established as the creators see great potential within the video game market, which has been increasing significantly and even recently “beating out the box office in yearly totals” (VG Group, www.vggroup.com/about/gaming.htm,

2/3/05). Since technology is rapidly increasing, and as a result the potential of video games, more and more people are interested in the prospects of gaming as a form of entertainment, and ‘Game Kingdom’ aims to both maintain and introduce people into video games. The opportunity of success is strong, and will be achieved by outdoing competitors in terms of service, quality, and products. The following graph (Fig. 1.7.1) shows the steady increase of the game market over 10 years.

Fig. 1.7.1- Game Industry Yearly Earnings

(Graph Adapted from Game Stats, www.gamerarena.com.au/stats, 3/4/05)

1.8. PURPOSE AND IMPORTANCE OF PLAN .

Planning in a business and constantly reviewing the plan to see if it was effective (controlling) is essential to the success of a

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business, and ‘Game Kingdom’ recognises this. Planning improves the business’ ability to establish and consistently meet its objectives and goals. The business plan can be useful for the business’ finance as it helps to persuade creditors and financiers that the business is worth funding in. ‘Game Kingdom’ will use three levels of planning: strategic, tactical, and operational. The strategic plan includes long-term growth, improved customer service, and increased profitability. The tactical plan includes making detailed decisions about what to do, who will do it, and how to do it, and the operational plan involves day-to-day tasks such as forming schedules, securing resources, and reporting the progress of ‘Game Kingdom’.

Fig. 1.8.1- Steps in Planning Process

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(Graph Adapted from ‘Planning’, www.ollie.dcccd.edu/mgmt1374/images/planpro.gif, 5/9/03)

1.9. BUSINESS LIFE CYCLE .

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Establishment

Growth Maturity Post Maturity

In order to prevent the failure of ‘Game Kingdom’, an understanding of the business life cycle is essential; particularly the challenges that are presented to the management by each stage in the cycle. Currently at the establishment stage, many factors need to be taken into consideration by management, and if not, the business will likely fail, as 75% of small businesses fail due to poor management.

1.9.1. Establishment‘Game Kingdom’ is currently at the Establishment phase, a level full of “expectation, creativity, and enthusiasm” (Horsley, M., Anderson, S., Biddle, I., Mulas, R. (2003). Business Studies Preliminary Course, pg 20). This stage is where all the major business decisions are made, such as location, legal structure, finance, etc. The decisions made in the establishment phase can significantly alter the success of ‘Game Kingdom’, so careful planning and research is necessary. If good decisions are made and ‘Game Kingdom’ established itself, it is ready to move on to the growth phase.1.9.2. Growth“The essential feature of this stage is the continual improvement in the business’s working capital and the protection of its initial investment.” (Horsley, M., Anderson, S., Biddle, I., Mulas, R. (2003). Business

Studies Preliminary Course, pg 21). The growth stage presents the business with increased sales, and essentially means the ‘business is in business’. The phase presents numerous problems and challenges to managers, as at this stage seeking support to undertake many of the non-core activities of the business is a

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Decline

Steady State

Renewal

Cessation

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possibility. By this outsourcing of many of the non-core activities, management can concentrate on the prime function of ‘Game Kingdom’ and improve its quality and efficiency. Other challenges for managers include considering whether legal structures are needed in the growth stage. During this phase, ‘Game Kingdom’ would need to reassess its long-term goals and look to other possibilities of expansion including that of a merger or takeover.

1.9.3. MaturityThe maturity stage is where the businesses’ growth and market share begin to slow down, possibly an effect from competition or loss of enthusiasm. At this stage, management may need to make some decisions in order to ensure the ongoing success of the business. Challenges and decisions that face managers at this phase include such things as adapting to the latest technology, taking advantage of new market opportunities, and building customer loyalty. It is this stage where the once vigorous and risk-taking management slow down to a routine and are weary of taking further risks, but in doing so they may be placing an irreversible burden on the business. (Horsley, M., Anderson, S.,

Biddle, I., Mulas, R. (2003). Business Studies Preliminary Course, pg 24-25).

1.9.4. Post-MaturityThe result that occurs in the post-maturity phase depends one how the management reacted to the challenges they faced in the maturity phase. If ‘Game Kingdom’ made informed decisions in the previous stage, the business will continue to experience steady growth. If certain risks are taken, the business may be able to renew itself to meet customer demands, and similarly, decline is a possibility if poor decisions, if any, are made. If the management does not face the challenges placed upon them on this stage, the business may ultimately head towards cessation, so hence careful planning and informed management is essential. (Horsley, M., Anderson, S., Biddle, I., Mulas, R. (2003). Business Studies Preliminary Course, pg 25).

1.10. BUSINESS GOALS .

The goals of ‘Game Kingdom’ can be divided in Financial, Social, and Personal goals:

1.10.1 - Financial Goals

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Maximise profitability by maximising sales and reducing unnecessary expenses within operations

Financing innovation Increase market share Steadily grow – open chain stores across the Sydney

metropolitan area Negotiate loan terms with lenders to allow for an achievable

and practical schedule of payments Achieve turnover within 5 years of operation

1.10.2 - Social Goals

Act responsibly so society has a positive view of ‘Game Kingdom’

Act as a business that presents itself as environmentally friendly

Adoption of sustainable development practices Sponsor charities and give aid for schools in need of

computing equipment Sponsorship of Carlingford Gators, a soccer club within the

area. Provide apprentice training employment Employee satisfaction Continued employment

1.10.3 - Personal Goals

Job satisfaction by presenting an enjoyable and honest work environment

Power and influence Prestige Various personal benefits

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1.11. SWOT ANALYSIS .

Strengths Unique business that offers services currently unmatched

by competitors, e.g. shipping any selected game product upon request with a small fee

To avoid future competitors stealing business, ‘Game Kingdom’ will maintain an outstanding level of sincere customer service.

Able to give genuine customer care, as the current small amount of work means ‘Game Kingdom’ will have plenty of time to devote to customers.

Joe Bloggs, a partner with Aziz, has a strong reputation within the video game market

Increased capital and industry experience due to ownership status

Supports community based projects and has a high regard for social perception

Direction can be changed quickly if marketing techniques are inefficient

Significant emphasis on employee training and quality service

Low establishment costs due to partnership business structure

Business location is in an active shopping centre

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Weaknesses Training crew could be difficult as being a business that

promotes itself as knowledgeable in the video game entertainment industry; employees would need a vast and sincere knowledge of gaming titles, hardware, and capabilities.

Increasing competition - Electronics Boutique, a video game specialty store, is also located in Carlingford Court, the proposed location for ‘Game Kingdom’

No market presence or reputation Vulnerable to vital staff being sick, leaving, etc Cash flow may be unreliable in early stages

Opportunities Positive market perceptions about the business Option to diversify to a game rental business Expand into a chain of ‘Game Kingdom’s Business sector expanding, increasing opportunities for

success Competitors slow to adapt the new technology

Threats Major competition exists against the likes of large

department stores Changes in focus of a large competitor might wipe out any

market position ‘Game Kingdom’ achieves Many new competitors emerging as the game industry

strengthens Pricing of products and potential price war with competitors Possibility for a video game and computer market crash, as

had occurred in 1983, which can heavily affect ‘Game Kingdom’.

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2.0. OPERATIONS PLAN .

The operations plan will include: Description of the products Staffing requirements Human resource department

2.1. PRODUCT DESCRIPTION .

‘Game Kingdom’ provides many readily available gaming related products these products include:

2.1.1. Game consolesGame consoles include the immensely popular Sony Playstation 2, Microsoft Xbox, and Nintendo Gamecube. The consoles will for the bulk of the sales made with ‘Game Kingdom’. The consoles also include game portables, such as the market-dominating Nintendo Gameboy, and the new PSP from Sony. To distinguish itself from the legions of competitors who provide these specified consoles, ‘Game Kingdom’ will provide a high level of service combing unprecedented deals and specific importance placed on quality control to gain favour of customers and in turn guarantee the ongoing success of the business. Special deals would include heavy discounts on consoles if bought in conjunction with other specified items, cheaper prices for members with a specific card that can be purchased from the store and exchanging or refunding products if they do not meet the needs of the customers, beyond that required by the Trade Practices Act.

2.1.2. Game Peripherals‘Game Kingdom’ will sell a vast range of peripherals designed for video games. This can rage from controllers, joysticks, memory cards, and extensions such as dance mats and steering wheels. ‘Game Kingdom’ will stock products made by various companies as to increase the choice that will be given to the customer. Peripherals can either be bought separately, or combined with other items to receive a discount on the price.

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2.1.3. Game Software‘Game Kingdom’ will stock a vast array of game software titles. The unique and innovative aspect of the business is that ‘Game Kingdom’ will allow people to custom-order games that are not available at Australia, and this will attract customers to the business. Game software will be consistently priced lower than business rivals in order to maintain a competitive edge. ‘Game Kingdom’ will also allow people to trade in their old games in exchange for store credit, and these games will be sold in a separate second-hand section, placed at a considerably lower price than newer items. ‘Game Kingdom’ also places incredible importance on selling new titles as soon as they are released to the market.2.1.4. Computing Hardware‘Game Kingdom’ is not only for people interested in video game entertainment, but it is also a place for people to buy specific computer parts and upgrade their computing processing capabilities and power. The business will stock the latest hardware devices designed for computing, and will also sell top of the line computing products such as laser mice, wireless keyboards, and surround sound speakers. ‘Game Kingdom’ will sell the most powerful graphics cards available on the market, and considering the rarity of computing stores that only sell certain parts, the business is sure to attract a vaster market than other specialty video game businesses.

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2.1.5. Collectibles‘Game Kingdom’ will sell exclusive video game collectibles, such as trading cards, action figures, memorabilia, and old classic systems such as the Atari. The collectibles, along with other products sold by the ‘Game Kingdom’, ensure that it is one of the most thorough and complete businesses of its kind.

2.2. STAFFING REQUIREMENTS .

Trading hours for ‘Game Kingdom’ will be from 9am to 5pm on every day of the week bar Thursday, where increased traffic from an extended shopping night allow the business to work until 9pm. Two employees are required at the very least on any given day, in conjunction with one a permanent crew member maintaining the store. Thursday and Weekends will require an additional employee, as shopper traffic is considerably higher on these days. 2 full-time general managers will also be hired to look after administration and supervision. All up, the crew of ‘Game Kingdom’ will consist of four full-time and three part-time service people as well as two casuals.

2.3. HUMAN RESOURCE DEPARTMENT .

Fig. 2.3.1 – Human Resource Cycle

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Human Resource

CycleMaintenance

Recruitment

Selection

Development

Acquisition

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(Image adapted from: Horsley, M., Anderson, S., Biddle, I., Mulas, R. (2003). Business Studies Preliminary Course, pg 125). The Human Resource Cycle refers to the links and process that are involved in employing people into a business. The Human Resource Department is responsible for carrying out the processes in the cycle. Employees are employed; they contribute to the business and eventually leave. This process can be seen in the different stages of the Human Resource Cycle (Fig 2.3.1).

2.3.2. Acquisition

‘Game Kingdom’ has certain labour needs and the labour requirements of the business must be constantly evaluated. The business of ‘Game Kingdom’ specialises in technological and gaming entertainment products so the labour requirements of the business are:

Qualified personnel who are knowledgeable in regards to games

Employees that encompass good people skills to assist customers

Computer literate

‘Game Kingdom’ will need to either outsource or employ an accountant during the Growth Phase because this stage brings about growth-related problems, such as cash-flow problems, to control the financial aspects of the business. The business also needs to employ people who are properly and genuinely knowledgeable in computing hardware and gaming entertainment so that they have sufficient knowledge to assist customers with an array of problems. These employees will also need to have good communication skills and a positive, kind attitude, as the business would like to be seen as one to have an excellent reputation.

‘Game Kingdom’ would also like to improve the customer’s perception of the business through not only providing a service, such as custom ordering games from overseas, but providing after-sale services, such as advising the customer on help in setting up a console, or even game help if someone is having a difficult time with a particular game. The Human Resource

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Manager creates a skills analysis about what skills and qualities are required of employees. This information is then transferred into what is simply known as a job description, where prospective employees can get a suggestion as to what is required of them when they enquire for the job.

2.3.3. Recruitment

Following the need for skilled labour as identified in the acquisition stage, job descriptions are then created and are to be communicated with potential employees. The business would most likely use external recruitment (outside the firm) to attract employees as there would be only two skilled people currently in the partnership, therefore the business has to recruit employees externally.

‘Game Kingdom’ must decide the most cost-effective method to communicate with prospective employees as the business is just starting to be established, so it would have to save costs for aspects of the business, such as marketing, covering overheads and paying off creditors and suppliers. The most cost-effective method that should be used to advertise job positions in the business should be through advertising in newspapers, as well as online, where it can reach across a larger number of people.

2.3.4. Selection

After ‘Game Kingdom’ has received a sufficient number of applicants, or after a designated period of time, the owners, Aziz Shavershian and Joe Bloggs, will examine each applicant’s resume. The main aspects that will be looked for on each applicant’s resume are their previous work experiences and the depth of their qualifications. Once the owners have chosen sufficient applicants based on the information stated on their resume, they will decide which employees will be interviewed for further examination. The owners will contact each applicant deemed successful based on their resume and then they will interview each applicant. The owners will ask the applicant a series of question that will give an insight as to whether or not the applicant is the right person for the job.

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After the owner has interviewed each applicant, a decision will be made as to whether or not successful applicants should be employed or new applicants should be sought after through more job applications in the newspaper and/or online.

When a sufficient number of applicants have been employed into ‘Game Kingdom’, the owners will decide on a roster to place each employee based on their flexibility concerning working hours. The newly employed employees will then undergo development and are to be inducted into ‘Game Kingdom’

“Choosing the right employee is hard. Choosing the wrong employee is harder” (Mark Dalton, EB Games, www.ebgames.com, 6/5/05)

2.3.5. Development

After the owners of ‘Game Kingdom’ have employed a sufficient number of employees, the employees will have to be familiarised with the operations of the business. The aspects of the business that are needed to be familiarised with include:

Daily operations such as opening the store in the morning and closing up in the evening,

Servicing customers who need help with gaming needs, which include customers inquiring about various games,

Giving the right advice to customers about purchasing new games and accessories, consoles or understanding what game is appropriate for a certain age group

Being able to operate the cash register correctly and to also handle large amounts of money and credit purchases in a responsible and efficient manner

Presentation of products Privileges, breaks, behavioural standards, etc. “The way Things are done around here”

‘Game Kingdom’ might employ someone that is suitable for the job but does not have sufficient capabilities, and will then decide whether or not to offer courses in TAFE for the employee to undertake so that he or she is able to undertake the job with more skill and understanding.

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2.3.6. Maintenance

When the employees have been officially employed, the business of ‘Game Kingdom’ will strive to achieve in building a sense of commitment and loyalty amongst the employees of the business, so that there is a low probability of the employees of the business leaving for reasons such as a lack of job satisfaction. The business will try to achieve a level of commitment and loyalty to the business by organising social functions, offering pay rises to hard-working employees and Increasing the range of skills that the employee currently posses and therefore increasing the chances of promotion into a more skilled position

‘Game Kingdom’ also aims to achieve commitment and loyalty amongst employees by offering flexible working hours so that the employee can perform the job at suitable times for them and therefore the employees will then have a sense of job satisfaction and security as they can work at requested times. The business will then have to employ more than the suggested number of employees to cater for other employees that need to have flexible working hours. ‘Game Kingdom’ will then need to employ more casual workers that will fill in for employees who will need to take unexpected leave or to go on holidays. By presenting a secure and comfortable working environment for all employees of ‘Game Kingdom’, there would be a less likely chance that they will leave the business.

“Employee job satisfaction is just as important, if not more, than that of customer satisfaction” (Robert Newcombe, Employees, www.wikipedia.employee, 7/4/05)

2.3.7. Separation

If an employee leaves ‘Game Kingdom’ for any particular reason, the business will need to immediately employ another suitable person to replace the employee so that the business is able to run smoothly. The employee can leave the organisation through either involuntary separation or voluntary separation. In the case of voluntary separation, the employee is the one that makes the decision to leave at their own discretion. Involuntary separation

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occurs when the employer decides that the employee should leave the business for whatever reason.

The forms of voluntary separation include retirement and resignation. If an employee of ‘Game Kingdom’ decides to retire from their current position within the business, ‘Game Kingdom’ will offer that employee a small pay package for their services to the business and to the workforce in general. For either case, if an employee decides to retire or resign, the business will have to find a replacement.

The forms of involuntary separation include voluntary redundancy, involuntary redundancy, and retrenchment. When an employee of ‘Game Kingdom’ is made redundant, it means that the employee is longer needed due to many reasons such as restructuring, downsizing or a change in technology. Redundancy can either be voluntary or involuntary. Voluntary redundancy occurs when the business offers employees to leave the organisation and they are offered a pay package. Involuntary redundancy occurs when the owners decide which employees will leave and the employee is not given a choice. Retrenchment occurs when there is not enough work or labour to justify the continued employment of an employee.3.0. MARKETING PLAN .

The marketing plan will include: Analysis of existing competition Target Market Sales forecasts Marketing strategies for the 4 P’s (Product, Price, Promotion,

Place)

3.1. COMPETITION .

‘Game Kingdom’ has a significant number of competitive forces, so keeping tabs on competitors is essential to the success of the business. The competitors form one of the most closely monitored environmental factors, and as a result the way ‘Game Kingdom’ operates is altered depending on any changes made by competitors. This is done so potential customers or clients have

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no reason to favour another organisation over ‘Game Kingdom’, and hence this is extremely significant in maintaining a successful business. Taking competitors for granted and not making decisions based on the decisions made by competitors will only disadvantage the business. The most significant rivals of ‘Game Kingdom’ in Carlingford Court include:

Electronics Boutique Dick Smith Electronics Major department stores, including Target and Myer

These competitors have very similar aims to ‘Game Kingdom’, and being aware of competitor activities is essential.

3.1.1. Competitor influence on day to day running of ‘Game Kingdom’:The competitors of ‘Game Kingdom’ have significant influence in regards to the daily operations of the business. The activities of competitors and any change in the operations of competitors are closely monitored. If a competitor cuts a price, it is likely that ‘Game Kingdom’ will follow, even if it means losing profits. If a competitor spends more money to improve the quality, ‘Game Kingdom’ will likely make a similar decision. Other factors such as promotion and advertising of competitor’s brands are also examined. Tracking the actions of competitors can be done in numerous ways, including commercial databases, annual reports, and published market-research reports. New products of a competitor can also affect the day to day running of ‘Game Kingdom’, as the competitors are potentially increasing profits with the new product and the business would ultimately need to make a decision. As well as this, competitors with new guarantees and promises for better delivery, service or special deals can affect the daily running of ‘Game Kingdom’, and something would need to be done in retaliation.

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3.2. TARGET MARKET .

The gaming industry is known for its somewhat restricted target market; exclusively children, teens, and young adults. The gender of the target market is heavily males, outnumbering female video game players 10 to 1. (Game Surveys,

www.surveyest.org/game, 2/4/04). ‘Game Kingdom’ aims to break the mould and bring in a new demographic, including families and females. This will be achieved by providing more products that will appeal to these markets.

The main target market of ‘Game Kingdom’ is male teenagers and adults in the 20-30 range, who are interested with the prospects of gaming multimedia as a main source of entertainment. The majority of services as deals provided by ‘Game Kingdom’ will suit the needs of this significantly large demographic, and in turn ensure the success of the business. Children are also a significant demographic who ‘Game Kingdom’ caters for, providing both family-friendly entertainment titles as well as educational software programs.

The target market also includes anyone who is looking for exclusive upgrades to their computer, such as high storage hard drives, amazingly powerful processors, and top-of-the-line graphics cards. Although ‘Game Kingdom’ does not sell bundles

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computer setups, they specialise in specific computing parts and in turn appeal to anyone looking for any particular piece of computer hardware.

Fig. 3.2.1- The Gaming Market

(Graph Adapted from Game Stats, www.gamerarena.com.au/stats, 3/4/05)

3.3. SALES FORECASTS .

‘Game Kingdom’ will forecast its sales so that it can be compared to the actual sales of the business within the first few months and years once the business is operational. The forecast must be realistic and achievable, and if the specified targets are not reached, changes to the business plan, and as a result the business operations, may be required. A sales forecast for the first year is shown in Fig 3.3.1.

Fig. 3.3.1- First year projected sales

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$6,000

$10,000

$12,000

$15,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

1 2 3 4

Quarter

Sales

‘Game Kingdom’ forecasts that the business will generate in sales, on average, around $2000 per month in the first quarter. In the next quarter, the business forecasts to generate $10 000 in sales, which can be commended to the marketing strategies of the business starting to work and customers being encouraged to visit the business. The amount of sales in 3rd and 4th quarters ($12 000 and $15 000 respectively) show the business is increasing sales gradually. ‘Game Kingdom’ must be consistent in terms of its sales figures to stay competitive for a long amount of time in this highly competitive market. For the business to achieve consistency, it must embrace new innovations in Australia and overseas. The sales forecast for the second year is shown below in Fig 3.3.2.

Fig. 3.3.2- Second year projected sales

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$12,000

$13,000 $13,000

$14,000

$11,000

$11,500

$12,000

$12,500

$13,000

$13,500

$14,000

$14,500

1 2 3 4

Quarter

Sales

The second year of sales forecasts as shown in Fig 3.3.1, show the increasing steadiness of sales. Naturally, some quarters are likely to generate more sales than others, in particular, the 4th

quarter Christmas season, where game products are very commonly purchased. In the second year of ‘Game Kingdom’ being in operation, it aims to achieve a level of consumer satisfaction and business reputation greater than that of the first year in operation. In the sales forecast, the amount of sales generated by the business is expected to be more consistent, due to the customer satisfaction and the reputation that the business has built up in the previous year. If the business happens to diversify in the latter stages of the business life cycle, it predicts a higher level of sales as there are a wider range of products that the business is able to sell to its customers.

3.4. MARKETING MIX .

The marketing mix is the variables that marketing managers can control in order to best satisfy the customers in the target market. It highlights what the product is, how it will be priced, how the product will be promoted and how the product will be transported to the retail store, then selling it to customers. The

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four elements of the marketing mix are product, price, promotion and place.

Fig. 3.4.1- The Marketing Mix

3.5. PRODUCT .

‘Game Kingdom’ will employ various marketing strategies in relation to products. The merchandising is essential, and is meticulously monitored for efficiency. Products designed for children will be placed on lower shelves, will colourful, attractive box art. Mature rated titles will be placed on higher shelves, in line with an adult’s eyesight. The store presentation will be one that promotes the products it contains. There will be various stations where consoles can be played, and the latest games will be preloaded into these consoles, and as people try it out and enjoy it, more copies would be ultimately sold. The store will have a technological look and feel, with posters across the walls of famous video game creators and characters.

With new releases of consoles and games, ‘Game Kingdom’ will offer additional products if certain items are preordered. This will allow for a competitive advantage over business rivals. Most importantly, ‘Game Kingdom’ holds customer satisfaction, or lack thereof, to be crucial to the success of the business. If a person

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purchases a product that is faulty, or a console that plays up on them after a while, ‘Game Kingdom’ will offer a full refund, or exchange, without any misleading signs. Further to what is required by the Trade Practices Act, ‘Game Kingdom’ will allow a period of one week after the purchase of a product for the buyer to decide whether or not they enjoy the product, and if they don’t, they may exchange it for another item. This unique service will gain customer confidence in the business and allow for a competitive edge.

3.6. PRICE .

‘Game Kingdom’ will employ various marketing strategies in relation to the pricing of its products. The pricing is crucial in any business, and ‘Game Kingdom’ understands this. The pricing techniques that will be employed by the business include:

Psychological pricing Penetration pricing Discount and sale pricing Meet the competition pricing Skimming pricing

3.6.1. Psychological pricingPsychological pricing refers to prices that are a little less than a round number, e.g. $19.99 instead of $20, and $49.95 instead of $50. Psychological pricing is a theory that these prices have a psychological impact that drives demand greater than would be expected if prices were a round number. New release software

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titles would be placed at $98. 95, less than the recommended retail price of $100. Although a common and overused method, its effectiveness cannot be overlooked by ‘Game Kingdom’ and hence this method would be employed.

3.6.2. Penetration pricingPenetration pricing is used when a business prices a product below the normal market price to attract customers to a cheaper product compared to other products in the market. The expectation is that the initial low price will secure market acceptance. This pricing strategy will be used by the Game Kingdom’ when it is entering the Video game technology market.3.6.3. Discount and Sale pricingDiscount and Sale prices are used to entice customers to buy various products. Upon entry into the market, ‘Game Kingdom’ will make use of discount prices in various ways, including altering the price depending on the season, proving the option for a ‘Game Kingdom’ membership card which allows customers to get 5% off any product, and discounts on certain games for people who traded in their own used copies of games. Having all these options in regards to price means that ‘Game Kingdom’ will hold a competitive advantage and attract more customers.

3.6.4. Meet the competition pricingMeet the competition pricing refers to pricing products depending on the pricing used by competitors. Using this technique is essential to the success of ‘Game Kingdom’, as if a competitor has lower prices, customer loyalty would decrease and they would likely purchase products from the cheaper competitor. If a business rival places a product as a cheaper price than ‘Game Kingdom’, the business will alter the price of the specific product(s) in retaliation.

Game Kingdom’ aims to hold a competitive edge over competitors in terms of pricing, and will place products cheaper than competitors, however small the difference may be. If a customer finds a product at a competitors store priced cheaper than that of ‘Game Kingdom’, the business will give a special deal that the price will be matched. In fact, the specific product will be sold at 10% less than the competitor, regardless of the amount of profits lost, as maintaining a strong customer base is essential to ‘Game Kingdom’.

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3.6.5. Skimming pricingSkimming Pricing will be used by ‘Game Kingdom’ to price products at higher prices than its competitors to make quick profits and then to lower the price until more competitors arrive in the market to push the prices back to its original level. ‘Game Kingdom’ will use the strategy of skimming pricing when the business can comfortably cover its expenses and overheads and there are very few competitors that pose a threat towards the business.

“Pricing strategies are important in differentiating and positioning a product or service in relation to its competitors”. (Fleming, L. Excel Business Studies. Pg 34).

The price strategy will also be combined with a discount strategy, whereby the customers are rewarded a 10% discount when they complete a customer feedback survey. This is essential for the development and maintenance of staff and also satisfies the customer as they receive benefits.

3.7. PROMOTION .

Promotion is designed to inform the marketplace about who you are, how good your product is and where they can buy it. In order to achieve the desired objectives and appeal to the target market, promotion is vital. It is the communication from the business to the customer. ‘Game Kingdom’ aims to take advantage of the following mediums to promote the business:

Print Radio

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Internet Billboards Shopping Centre announcements Word of mouth

3.7.1. PrintPrint includes, but is not limited to, newspapers, magazines, brochures and mail catalogues. Local Newspaper advertisements will form an important part of advertisements in print form, as there will be whole pages dedicated to promoting and advertising ‘Game Kingdom’ and various specials. The sheer number of people who read newspapers means that the advertisement can be seen by a vast number of people. As well as this, the advertisement design and colours could be attractive to gain the attention of the reader and interest them in the business. ‘Game Kingdom’ will also advertise itself on pamphlets, coupons, and magazines. The business description and advertisement will be placed in the most popular Australian Gaming magazines, as to be exposed to the direct target market of the business. Enclosed at the end of this folder is an example of a competitors (EB ltd.) method of print advertising, a monthly catalogue filled with deals.3.7.2. RadioThe Radio is one of the most commonly used medium to advertise products. Advertising on the radio proves to have significant benefits, including that it is significantly cheaper than television advertising and it is still broadcast to a large number of people. ‘Game Kingdom’ aims to purchase time blocks where most people listen to the radio, and introduce a range of radio ads. Radio will be one of the most effective ways in advertising the business.

3.7.3. Internet‘Game Kingdom’ aims to implement a branch of advertisements specifically catered for technology such as the Internet. These advertisements will be placed on websites that have both high traffic and appropriate content which match what the business is trying to achieve.

3.7.4. Billboards‘Game Kingdom’ plans to implement billboards as a means of advertising. Increasingly popular, billboards are often used to advertise certain products. Advertisements on billboards for the

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business can be placed outside the shopping centre of Carlingford Court, and in neighbouring suburbs.

3.7.5. Shopping Centre AnnouncementsShopping centre announcements, although commonly overlooked, can serve as a powerful advertising tool, and will be used by ‘Game Kingdom’. Announcements can serve as a reminder to people, and also sway them to ‘Game Kingdom’ rather than a competitor, as special offers can be announced, etc.3.7.6. Word of Mouth AdvertisingThe marketing power of word of mouth cannot be underestimated, and it is debated whether or not it is the most effective means of advertising as compared to blatant ads placed in newspapers, etc. ‘Game Kingdom’ understands the importance of word of mouth advertising, and will use any means possible to advertise the business in this way.

3.8. PLACE .

Place simply refers to how ‘Game Kingdom’ will sell products to the customers. Depending on what it is that is being sold will directly influence how the good or service will be distributed, and it affects mainly those business that are in production. Seeing as this is the establishment phase of the business, and only one store is currently open, it makes this store an exclusive distributor – the supply of this service is limited to a particular store or outlet.

‘Game Kingdom’ is located in Carlingford Court, and this is where products will be sold. Carlingford Court is a robust and active shopping centre, and is growing yearly. The business will be located on the ground floor, directly next to the elevator. This is done specifically so customers can see and enter ‘Game Kingdom’ before any other competitors in the shopping centre.

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Carlingford Court4.0. FINANCE PLAN .

The finance plan will include: Financial requirements Financial statements Financial strategies

4.1. FINANCIAL REQUIREMENTS .

‘Game Kingdom’ will need funds once it is established to operate successfully. Finance can be obtained either externally or internally and ‘Game Kingdom’ will obtain finance both ways. The business will obtain internal finance through contribution of the owners. Due to the fact that the business structure of ‘Game Kingdom’ is a partner ship, funds will come from both of the owners, a huge advantage and a chief reason why the structure was chosen. The owners will contribute approximately $750,000 for the first year that the business is in operation.

Alternatively, external finance will be sought after by the business from banks, finance companies, merchant banks, and building societies. The business must provide evidence that the concept of ‘Game Kingdom’ will be able to turn into a feasible business so that third parties will be willing to invest into the business, which then contributes towards the funds of the business. This business plan is essential for that reason. The business must be able to finance establishment costs with funds left over for working capital. These establishment costs include such things as loan repayments for the premises, costs for utilities, insurance, furniture, and business registration.

4.2. FINANCIAL STATEMENTS .

Financial statements are used by businesses to demonstrate how the business is progressing over a period of time. These financial statements will be used by ‘Game Kingdom’ as a comparison with other competitors in the market. The three basic financial statements include:

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Revenue Statements Balance Sheets Cash Flow Statements

4.2.1. Revenue Statements

Also known as a Profit and loss statement, A Revenue Statement is used to indicate how much revenue a business has made over a certain period of time, the expenses that have been incurred in operating and running the business and to calculate the Gross and Net Profit. The Revenue Statement also shows the Cost of Goods Sold (COGS). ‘Game Kingdom’ will acquire expenses to sell their products and COGS can be determined using the formula:

Cost of Goods Sold (COGS) = (Opening Stock + Purchases) — Closing Stock

Once the Cost of Goods Sold is determined, this figure is subtracted from the Sales (Revenue) to determine the business’ Gross Profit:

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Gross Profit = Sales (Revenue) — Cost of Goods Sold (COGS)

Net profit is a more accurate measurement than the Gross Profit of what the business actually has in terms of funds. Net Profit is determined by subtracting the expenses of the business from the Gross Profit:

Net Profit = Gross Profit — Expenses

The Net profit is then the final amount of money that the business has earned over the past year. The predicted Revenue Statement of ‘Game Kingdom’ for the first year in operation is shown in Fig 4.2.2.

Fig. 4.2.2- Revenue Statement

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4.2.3. Balance Sheets

A Balance Sheet shows what the business owns (Assets), any amount of money put into the business by the owner(s) (Owner’s Equity) and current loans or borrowings (Liabilities). The Balance Sheet is based on a simple accounting formula:

Assets = Liabilities + Owner’s Equity

Fig. 4.2.4- Predicted balance sheet after a year of operation

REVENUE STATEMENT

Game KingdomFor the year ending 30 June 2006

Sales 2000 000Cost of salesBeginning stock 80 000Purchases 1 320 000Less ending stock (200 000) 1 200 000Gross Profit 800 000

Operating expensesSalaries 80 000Wages 120 000Marketing 300 000Occupancy 70 000Administration 40 000Depreciation 40 000Interest 100 000 750 000

Net profit before tax 50 000Provision for income tax 20 000

Net profit after tax 30 000

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The working capital ratio of a business can be determined through the business’ balance sheet, with the formula:Working Capital Ratio = Current Assets ÷ Current Liabilities4.2.5. Cash Flow StatementsA Cash Flow Statement is similar to a Revenue Statement as it shows the progression or regression of the business over a certain period of time. The Cash Flow Statement shows the cash

BALANCE SHEET

Game KingdomAs at 30/06/06

Current AssetsCash 500 000Debtors 185 000Total current assets 685 000

Fixed (non-current) assetsPlant and equipment 200 000Buildings 750 000Land 250 000Total Fixed assets 1 200 000

Total assets 1 885 000

Current liabilities 320 000OverdraftCreditors 80 000Wages owing 200 000Total current liabilities 600 000

Long-term (non-current) liabilitiesMortgage 400 000Total long-term liabilities 400 000

Total liabilities 1 000 000

Owner’s equityContributed capital 600 000Retained profits 100 000Total owner’s equity 700 000

Total liabilities and owner’s equity 1 700 000

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that comes into the business and the cash that goes out of the business. A Cash Flow Statement helps a business to predict if and when cash shortages will occur and these can be covered with short-term loans such as bank overdrafts.

Fig. 4.2.6- Predicted cash-flow statement after a year of operation

4.3. IMPORTANCE AND USE OF FINANCIAL STATEMENTS .

When ‘Game Kingdom’ is in operation it will use financial statements to collect information and use this to contribute towards the successful operations of the business. These financial statements can be used to statistically analyse if the business is successful or not in its market. If the business discovers that certain aspects of the financial facet are in need of correction or modification, the business can then take appropriate action and make the necessary changes to the business. A business would not be able to conduct such exercises if it did not utilise the usefulness of financial statements. Financial Statements can also be used as a method of comparison. It can be used for time comparisons and industry average comparisons

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CASH-FLOW STATEMENT

Game KingdomFor the year ending 30 June 2006

Opening Cash Balance 31 600Less Cash deficit from operationsCash payments from operations 5000Cash received from customers 1000 4000

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Less Cash payments for non-current assetsEquipment 25 000 25 000

Closing cash balance 2600

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Once ‘Game Kingdom’ has been operating for a few years, it can use financial statements from earlier years and use this financial data as a comparison to current financial data. If the business uses financial data from the first few years of the business being established, and this financial data is used to be compared against financial data from five or six years after the business has been established, the business should find that the volume of sales and the assets of the business should have increased.

If the business has happened to see a decrease in the value of the business’ assets or that sales have steadily decreased in the financial statements, the business can take necessary and appropriate action to rectify the problem. The business could have options in diversifying the product range to sell full-fledged computer packages. The business may also decide to merge or take-over another rival company in the market.4.4. FINANCIAL STRATEGIES .

Implement controls over the usage of credit within the

business to reduce accounts payable. This will reduce the

accumulation of short term liabilities

Develop a petty cash system. It is essential to improve the

cash flow so the business can meet its debts as they fall

due.

Retain higher proportions of future profit in the business.

This will improve the solvency of ‘Game Kingdom’ and will

serve to provide funds for expansion/updating

Negotiate loan terms with lenders to allow for an achievable

and practical schedule of payments.

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5.0. BIBLIOGRAPHY .

Written Sources:

1. Anderson S, Biddle I, Mulas R, Horsley M (2000). Business Studies Preliminary Course. Heinemann, Victoria.

2. Jenkins T (2001). Marketing in Australia. Cloud ltd, Melbourne.

3. Newton C (2002). The World of Business. Semnyte publications, Montreal

4. Stevenson K (1999). Advertising. Penguin Group, Western Australia

5. Yasmin D (2000). Your First Business. Teal, Sydney.

Electronic Sources:

1. Australian Bureau of Statistics . [Internet]. Canberra, <http://www.abs.gov.au/> [16/6/05]

2. Business Marketing Association . [Internet]. Elliance, <http://www.marketing.org/> [14/6/05]

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3. Define. [Internet]. Orlando, Florida. <http://define.com/> [15/6/05]

4. Game Arena . [Internet]. Australia. <www.gamerarena.com.au/stats> [22/7/05]

5. Google. [Internet]. USA. <http://google.com/> [15-18/6/05]

6. VG Group. [Internet]. USA. <www.vggroup.com/about/gaming.htm> [17/7/05]

7. Wikipedia. [Internet]. USA. <http://wikipedia.org/> [16/6/05]

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