"3.6.3: Profit and Loss Projection:Year 0 1 2 3 4 5- 336000 369600 406560 447216 491938Income- 201600 221760 243936 268330 295163Cost of Goods - 134400 147840 162624 178886 196775Gross Profit- 128500 111600 111120 111296 111777Expenses / Overheads- 5900 27180 38628 50693 63749Profit After Tax- 7.38% 33.98% 48.29% 63.37% 79.69%ROEIWebpub.co.uk first year projected sales will be £336000 with a growth rate of 10% everyyear. Estimated gross margin on sales will be 66% in first business year nevertheless it willremain same nest following years. Projected return on equity investment is an satisfactorylevel.3.6.4 Investment evaluation:Payback (Yrs) 3.82NPV (10%) £102,909.85NPV (20%) £34,423.78IRR 27%Payback duration on investment is 4 years in first year. The expected return on investment is20% in this plan as discount rate of NPV is positive. This project is able to meet therequirement IRR at 27%. 26 3.6.5 Break-even analysis:£4,00,000 £3,50,000 £3,00,000 £2,50,000 Revenues £2,00,000 £1,50,000 contribution Values £ £1,00,000 fixed cost £50,000 pofitbefore tax £0 -£50,000 0 2000 4000 6000 8000 -£1,00,000 -£1,50,000 numberof units Amount of Income Contribution Fixed Cost Profit before taxunit0 £0 £0 £114,859 -£114,8593000 £144,000 £57,6000 £114,859 -£42,8594000 £192,000 £76,800 £114,859 -£18,8595000 £240,000 £96,000 £114,859 £5,1416000 £288,000 £115,200 £114,859 £29,1417000 £336,000 £134,400 £114,859 £53,141Expected break even of webpub.co.uk is in first year of business with the sale of 6000 units.3.6.6 Financial Risk and cost failure:The whole business of webpub.co.uk is online pre-paid transaction and physical sale willallow 1 month credit transaction. Generally speaking, online trading business dealt on cashand due to the nature of business has low economical risk. Moreover, company requiredamount of capital funded by owner and business loan legitimate company get monetaryflexibility. On the entire outlay of capital naturally helps to reduce the cost of breakdown. 27 3.7 ResourceRequirement Evaluation:A business success rate depends on its required resources availability, consideringproductions raw materials, supportive funds, human resource and finally most significant oneis human resource.Company will recruit 6 skill people balancing part time and full time in year 1. To hire talentemployee for the company, management will approach to job agencies. As the company isassuming the amount of sale will increase following years, webpub.co.uk will hire moreemployees in finishing and design sector.In order to run the business and continue the daily operation company will invest £80000 atstarting time. The entire amount will be invested by company owner. Considering cash flowprojection in beginning period company may require good amount of capital which will bemanage from the bank loan or family supportive sources.In order to maintain the production level company require a sufficient amount of rawmaterials from the supplier. One supplier from Indonesia is supporting in initial stage ofproduction stage thereafter company will make a deal with china and other Asia pacificcountry. 28 Chapter 4: Strategic Analysis and Business Model:Concept of business model is relatively an innovative impression and which is prompted byonline enrichment. The framework of business model is turn into significant, cause internettake place of traditional system of running business (Chesbrough and Rosenbloom, 2002).Offering mix product and services is the general model of publishing business and thecompany sales activity will be direct. From several business model technique webpub.co.ukwill chose offline / brick and online / click model to run business. Today?s competitivebusiness world usual brick model publish businesses are not capable to survive, on the otherside only using online publish service (click model) is unable to build customer trust andadding services. Although people are mostly depend on internet base trade in terms of timeand cost savings. Due to technology advancement and fastest website service individualsdemand online services. As webpub.co.uk is trading in UK market, local customer and wholeEurope customer able to access company website to place order. To provide a user friendlywebsite company will decorate entire website based on customer requirement.4.1 McKinsey 7S strategy (Peters and Waterman 1980) of organisation helps to restructurethe company.? Strategy: webpub.co.uk will maintain cost leadership strategy to run the business interms of product and market.? Structure: webpub.co.uk will register with company house as private company. Asa owner of the company myself is managing director of the company and one highstreet outlet in east London and central London leaded by one respective manager.In head office there will be two marketing executive, two designer, two prepressoperator, one press operator, one guillotine operator, two finisher and last not leastone logistics officer. ? Systems: In account of offering services company mostly focus on website andphysical outlet.? Shared Values: keep on mind customer satisfaction webpub.co.uk will serving theexiting market and allow and trained employee to pass on same business value.? Style: to main customer service satisfaction level company leadership style will bedemocratic and insist employee to take a part of authority while deal with customerserving and complain handling.29 ? Staff: to operate a online publish shop successfully employee or company staff isthe key sources of organisation and to perform a good service company willmotivate employee with different motivation idea including salary increment,bonus, promotion.? Skills: company service offering members are well educated on customer servingand performing business activities.4.2.1 Value Chain: Value chain analysis help to identify company activities offering optimum level of value andhow economic returns flow surrounded in yield chain. Kaplinsky (2001) and Wood (2001)have pointed out that “Value Chain Analysis revealed the complete series of activities whichare essential to bring a product or service from, through the different phase of production(involving a combination of physical transformation and the input of various producerservices), delivery to final consumers, including all process that added value to the productiveprocess.” The value chain of webpub.co.uk has been revealed in following plan: Figure:Porter?s Value ChainA company value chain complete with two activities namely primary activities andsupportive activities including follows sub activities:-Primary Activities: That serves a customer with the cost of daily activities and along with revenue from thoseactivities which explained follows:? Inbound Logistics: 30 The cost leadership management of webpub.co.uk is confirmed in its bend andresponsive inbound logistics activities. Inbound logistics involves with theconnection between supplier and firm. Supplier takes a major part in inboundactivities, as a supplier paper.com from Indonesia having a good business relationwith the company, supplying quality publish raw materials (eg; Paper) with goodprice in flexible credit terms, which help webpub.co.uk to achieve cost leadershipstrategy.? Operations: To transform raw materials to finish goods webpub.co.uk follows a well planedbusiness operation plan using advance technology. After getting a order datacollection department pass it to design section to approve it, then it forward to CTP(computer to plate) section to process it for publish. After completing publish com toguillotine operator to make a fine finished product, and finally logistics man book itfor delivery with prominent courier company to deliver to customer in goodcondition. To follow up, data centre again update the status of the order in online withtracking details.? Outbound Logistics:Mintel (2010) mentioned that “company has urbanized a range of outlet, which istactically located to attain utmost customer revelation.” As webpub.co.uk main focusin online trade, company outbound logistics do their responsibility from companywarehouse. In addition to that company having one physical outlet, where customerwill serve from this outlet by skill worker.31 "