ENTERPRENEURSHIP

Project: Report on
BELLUS DESIGNS LAMPS

Submitted to:

Mam Faiza Hassan

Submitted By:

Sidra Anjum 066

Arusa Sarwar F07-014
Farah Munawar 020
Hissam Mehmood 028
Haroon Abbas 022
Umair Saeed 048

Dated: 10- Jan- 2011

Management Sciences

COMSATS Institute of Information Technology, Lahore

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 TABLE OF CONTENTS:

INITIAL ASSESMENT:

• Need Recognition (Idea Generation)…………………………………….…3

• Market Assessment…………………………………………………………...3

• Appraisal of competition…………………………………………….………..3

• Preliminary Market Forecast…………………………………….…………....4

ENGINEERING AND ECONOMIC ANALYSIS:

• Analysis and synthesis…………………………………………………….….5

• Preliminary Product Design………………………………………………......6

• Preliminary Process Design…………………………………………….…….6

• Cost Estimation…………………………………………………………………8

• Proposal to Engineering and Marketing Department……………………..11

TESTING AND DEVELOPMENT……………………………………………….11

SAMPLES OF BELLUS DESIGNS……………………………………………..11

FINAL PLANNING:

• Marketing Plan………………………………………………………………...12

• Proposal for full scale operation……………………………………….……12

• Financial analysis of profit potential……………………………………......13

LAUNCH:

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 • Management Approval………………………………………………….....13

• Production of product and initiation of full scale operation…………...13

INITIAL ASSESMENT:

• Need Recognition (Idea Generation):

Any innovative business plan starts with the search for ideas. Experts believe that
greatest opportunities and highest leverage with new products are found by uncovering
the best possible set of unmet customer needs.

There are different creativity techniques that can be used for idea generation. We used
new context technique for idea generation and that is using familiar processes with new
context.

We decided to make decorative lamps using paper mashie technique and jute work.
There is no demand for these lamps in the market because people are not much aware
of this technique.

So we designed a questionnaire for creating a need for our product. We make sample
of sample of 400 people from different areas of Lahore and introduce our idea and
record their response. Out of 400 people 250 appreciated the idea and showed positive
response.

• Market Assessment:

Questionnaire results showed that mostly people who were in favor of developing this
product belongs to elite or higher middle class so we decided to target elite and higher
middle class as our market. The reason for this is that they pay cost for the decor of
their homes and offices as they are sensitive in creating attractiveness of their homes.

• Appraisal of competition:

There is not severe competition in the market for producing lamps. There are
companies who are producing salt, crystal and metallic lamps but no one is using paper
mashie technique or jute work. So we did not stop the idea and continued in developing
the product. For catering the competition, we use differentiation strategy i.e. we
clearly differentiated our technique that we are using to make lamps.

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We also focused the cost and quality strategies because salt, crystal and other lamps
cost too much specially the crystal and salt lamps and breakage fear is always attached
with them and paper mashie lamps costs medium with high quality and reliability.

• Preliminary Market Forecast:

According to the findings, 40% of the market share is captured by the manufacturers of
the salt lamps because they look beautiful and different, 30% of the market share is in
the hands of crystal lamps manufacturers and 10% of the market share is captured by
others (metal, marble etc) so our managers expect to capture 20% of the market share.
So we will start our production according to the market forecast.

Table Representation:

LAMP MANUFACTURERS MARKET SHARE

Salt Lamp Manufacturers 40%
Crystal Lamp Manufacturers 30%
Others Lamp Manufacturers 10%
Paper mashie and Jute Lamp 20% expected
Manufacturers

Pie Chart Representation:

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ENGINEERING AND ECONOMIC ANALYSIS:

• Analysis and synthesis:

Before the designing of the product, all the material is analyzed.

PAPER MASHIE LAMPS:

Raw material:

Raw material that will be used in making of product:

- News papers

- White glue

- Water

- Bulbs

- Wires

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 - Switches

- Holders

- Thermopile sheet

- Spray and Poster paints

News paper is the basic component of the product so quality of news paper is
maintained properly.

Machinery

- Drying machines

- Drill machines

JUTE LAMPS:

Raw material:

Raw material that will be used in making of product:

- UHU

- Steel Wire

- Wooden sticks

- Jute

- Jute twine

- Spray paints

- Poster and water colors

- Thermopile sheet

- Beats

- Switches

- Wire

- Bulbs

- Holders

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• Preliminary Product Design:

We planned to design standardized products but with some variety that is process of
making the product will be same but there will be variety in the designs. We planned to
design the product by considering following factors:

1. Quality:

Lamps would be made with high quality so that to create high customer satisfaction
and in turn to get good return.

2. Cost:

Product design would be so simple that help in reducing the cost because process
used for making the lamps is same.

3. Reliability:

Paper mashie lamps would be reliable because there is no fear of breakage is

attached with them as they are very hard. Jute lamps are delicate somewhat but
they are also tightly tied by wires.

4. Style:

The product’s looks will be so attractive that customer will pay for it to give his/her
home a stylish and attractive look.

• Preliminary Process Design:

We are starting business at small scale so only one plant has installed for the
processing of lamps on Raiwind road at 1 kanal area. The plant consists of 7 sections
i.e.

1- Mixing Department for Paper mashie lamps

2- Designing Department for Paper mashie lamps

3- Drying Department for Paper mashie lamps

4- Designing Department for Jute lamps

5- Coloring and Decor Department

6- Fixing Department

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 7- Packaging Department

The point to be noticed is that this project is labor intensive so limited machinery is
required because raw material used is so simple and easy to assemble.

Mixing Department for Paper Mashie Lamps:

There are 2 workers in this department. They work for mixing of basic raw materials i-e
firstly newspapers are dipped in water for six hours. When they fully get wet by
absorbing water, they are blended with glue in the pasted form. This process is done by
workers only and no machine is used during it.

Designing Department for Paper Mashie Lamps:

This step is also labor intensive and 2 workers are hired for it. In this department, paste
of glue and news papers is transformed into different shapes by pasting on different
shapes that are required. One of the workers is designer who designs structures in
different shapes for the making of lamps and other one paste the blend on them.

Drying Department for Paper Mashie Lamps:

Two drying machines are installed in drying department that is operated by two workers.
Here the pasted shapes are dried. After drying the blend gets hard so separated from
the structures on which blend was pasted and required shapes are obtained.

Designing Department for Jute lamps:

In this department, jute lamps are designed. It is done by the creative minded designer
who is specialized in jute work so capable of making innovative designs using jute.

Coloring and Decor Department:

Here both types of lamps are colored and decorated using paints and different beats.
This is done by two workers in this department.

Fixing Department:

In this department, all parts of lamps are fixed. Drill machines are used to make holes in
the paper mashie lamps for fixing of wires and lighting purpose. Then workers fix the
holders and bulbs in the lamps. After that all parts of the lamps are tied together by
wiring and in the end wires and switches are fixed. Three employees work in this
department.

Packaging Department:

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After fixing, lamps are sent to packaging department where two employees pack them
separately in boxes.

• Cost Estimation:

Before starting the product development, possible costs are estimated on the basis of
scale of business and quantity of production.

Estimated Calculations:

a. Quantity of Production:

No of units produce per day estimated = 5

No of units produce per month estimated = 5 x 30

= 150

b. Fixed Cost:

The fixed costs are those that do not change with number of units which include the
cost of machinery and equipment.

Calculations:

Machinery:

Cost of one drying machine = 50,000 Rs

Cost of two drying machines = 50,000 x 2

= 100,000 Rs

Cost of one drill machine = 2500 Rs

Cost of two drill machines = 2500 x 2

= 5000 Rs

Total machinery Cost = 100,000 + 5000

= 105,000 Rs

Equipment cost:

The equipment used includes tubs, color brushes, scissors, wire cutters and screw
drivers and their total cost estimated is 5000 Rs.

Total Fixed cost:

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Total Fixed cost = Machinery + Equipment

= 105,000+ 5000

= 110,000 Rs

c. Variable Cost:

The cost that can change with the change in number of units is called variable cost. The
variable costs estimated for starting of this project includes cost of raw material
assuming that per unit cost remains same in the starting month.

Calculations:

Cost of Raw Material:

Cost of one holder = 30

Cost of 150 holders = 30 x 150

= 4500 Rs

Cost of one bulb = 30

Cost of 150 bulbs = 30 x 150

= 4500 Rs

Cost of one switch = 15

Cost of 150 switches = 15 x 150

= 2250 Rs

Cost of wire per meter = 15

Cost of wire for 225 meters = 15 x 225

= 3375 Rs

Cost of one color spray gun = 110

Cost of 12 color spray guns = 110 x 12

= 1320 Rs

Cost of glue = 10,000 Rs

Cost of UHU = 2000 Rs

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Cost of news papers = 3000 Rs

Cost of jute = 1500

Cost of jute twine = 1000

Cost of steel wire = 300

Cost of poster and water colors = 2000

Cost of Wooden sticks, Thermopile sheet, Beats = 1000

Total Raw Material Cost = 4500 + 4500 + 2250 + 3375 + 1320 + 10,000 + 2000 + 3000
+ 1500

+ 1000 + 300 + 2000 + 1000

= 36,745 Rs

Salary Cost:

Salary of one employee per month = 4000

Salary of total employees per month = 4000 x 14

Total salary cost = 56,000 Rs

Total Variable Cost:

Total Variable Cost = Raw material + Salaries

= 36745 + 56000

= 92,745 Rs

d. Other Costs:

Other costs include marketing, administrative, electricity, water and transportation cost
and these are estimated to be 50,000 Rs collectively.

Total Cost Estimated:

Total Cost Estimated = Variable Cost + Fixed Cost + Other Costs

= 92,745 + 110,000 + 50,000

= 252,745 Rs

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So total expenses estimated for the starting of this business is 252,745 Rs and this cost
is reasonable for starting a small scale business.

• Proposal to Engineering and Marketing Department:

After designing the product and process and estimating cost to run the project, the
proposal is sent to engineering and marketing department. After acceptance from
engineering department that they can process the product, marketing department gives
the acceptance to the proposal for promotion of the product.

TESTING AND DEVELOPMENT:

Before starting the production, 12 samples are made and presented in the exhibition for
one day for testing to check the people response towards the product. It costs 5000 Rs
in making 12 samples of paper mashie and jute lamps and we crossed the breakeven
point and earned 5120 Rs by the sale of only 9 lamps in the exhibition. We got positive
response from the market as 9 out of the 12 lamps were sold in the exhibition so we
decided to finalize the project.

SAMPLES of BELLUS DESIGNS:

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FINAL PLANNING:

• Marketing Plan:

After testing marketing plan has made for promotion of product. For marketing, we
segment the target market with respect to area. We divided different societies in Lahore
i.e. Defense Housing society, Model Town, Wapda Town and Gulberg into segments.
Then we make strategies for targeting each segment.

Following ways will be used for promotion:

1. Television adds:

Attractive commercials are made to capture the customer’s attention.

2. Broachers:

We planned to send broachers to the residence of people that belong to these

societies to let them aware of our product as our target market is high middle and
elite class.

• Proposal for full scale operation:

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After marketing plan, proposal for full scale is send to administration to start the
production.

• Financial analysis of profit potential:

As the lamps look beautiful and attractive and good in quality, we decided to set prices
in medium range. The price ranges would be 700 to 1500 depending upon size and
design of the lamp.

As we have planned to produce 150 lamps per month, our estimated cost to install the
new product development is 252,745 Rs.

If we assume that all lamps sell at average price of upper and lower limit i-e 700+1500/2
=1100 per unit then:

It will generate revenue at the end of starting month = 1100 x 150 =165,000

Profit = Revenue _Cost

= 165,000_252,745

= _ 87,745

So at the end of first month, loss of 87,745 occurs because of installation cost of new
project. But later, development of this product would generate profit because fixed costs
of machinery and equipment would not occur again (just maintenance can occur but it
would be very low).

So if we deduct these costs from the total cost (252,745 _110000 =142,745) and add
other maintenance costs than can occur per month (142,745 + 20,000 = 162,745), then
profit in the future if 150 lamps sell at average price 1100 would be = 165,000 _162,745
= 2255 per month. This profit will be generated only if lamps would sell at average price
but this will be increased when the lamps will be sale at their original prices and when
the quantity of production would be raised to 10 lamps per day in the third month.

The above forecasts show that development of this product would generate long term
profit if the business gets successful.

LAUNCH:

• Management Approval:

When proposal is accepted, management gives approval for the production on the
basis of the customer’s acceptance of the product.

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• Production of product and initiation of full scale operation:

After approval, production of the product gets started and full scale operations are
initiated and finally the product is launched.

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