Ateneo de Manila UniversityJohn Gokongwei School of Management

Project Information Cataloging System (PICS)

Class Project Information and Cover Sheet

Name of Student/s: (Surname, Firstname, MI).Apolinar, Francis A.Castro, Jose Angelo G.Gabitan, Justin S.Koa, Kathrina L.Malabanan, Patricia F. Miranda, Laurence P.Montiel, Byron J.Nanagas, Lorenzo E. Si, Scott G.Tornilla, Stephanie C. Zamora, Ryan P.

School Year: 2009-2010 Sem: FirstSubject Code: LS 126Course Name: Strategy Formulation

Teacher(s): Carmelo V. Lopez

(Information below this line and in this colunm for use by Faculty &/or

PICS staff only.)Grade: Call Number:

Project Title: The Big O Functional Area:

Client: teens and yuppies who are attuned to the health and wellness trend; doughnut lovers open to healthful alternatives;

Comments:

Industry Category: Donut Industry

Abstract (150 words or less)

Golden Halo Inc. presents The Big O Doughnuts, a line of healthy baked doughnuts with sugar-free dips and yogurt fillings. The products come in original and wheat variants made tastier with sugar-free chocolate dip and mango, strawberry, pineapple and vanilla flavored yogurt. The product will be marketed as a better, healthier alternative to the popular but ultimately fatty donuts abound in the industry today.

The Big O Doughnuts is a playful brand promoting a fun, full and satisfyingly healthy lifestyle. This product is targeted towards the teens and young adults catering to the needs of a generation assigning great value to health and wellness. The product transforms the image of one of the most popular snack foods in the country today from a guilty pleasure into a guiltless delight.

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Author(s)’ Recommended Key WordsThe Big O, doughnuts, snack food, yogurt, wheat, low calorie, doughnut industry

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THE BIG O

LS126Q

Members:

Francis Apolinar

Jose Angelo Castro

Justin Gabitan

Kathrina Koa

Patricia Malabanan

Laurence Miranda

Byron Montiel

Lorenzo Nanagas

Scott Si

Stephanie Tornilla

Ryan Zamora

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TABLE OF CONTENTS

Executive Summary

I. Market and Industry Background-------------------------------------------------------------------------------- 7 A. Industry Structure and Industry GrowthB. Dominant Industry Market ForcesC. Drivers of Industry Change

II. Business Concept and Envisioned Future------------------------------------------------------------------- 14 A. Business ConceptB. CustomersC. Risk in the BusinessD. Porter’s 5 ForcesE. Key Factors for SuccessF. Market Feasibility G. Economic FeasibilityH. Mission/Vision I. Objectives

a. Short-Termb. Medium-Termc. Long-Term

III. Market Strategies --------------------------------------------------------------------------------------------------- 27 A. Target MarketB. Projected Market ShareC. PositioningD. PricingE. DistributionF. Promotion PlanG. Sales Potentia

IV. Competitive Analysis--------------------------------------------------------------------------------------------- 35

V. Design and Development Plan-------------------------------------------------------------------------------- 40 A. Research and Development

1. Rationale for the Design of this Development Phase2. Product Development 3. Market Testing and Development Activities4. Daizu Development Budget5. Risk Assessment

B. Supply Chain Managemnt Plan1. Supplier and Vendor Selection2. Inventory Management3. Direct and Indirect Materials of Production4. Supply Chain Process Integration5. Logistics6. Distribution Network

C. Operations Plan1. Facilities Layout

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2. Process Design3. Capacity Planning4. Scheduling

VI. Management & Financial Plans------------------------------------------------------------------------------- 56 A. Organizational StructureB. Man Power RequirementC. Overhead BudgetD. Capital BudgetE. Cost of Goods Sold

VII. Financial Plan & Projections----------------------------------------------------------------------------------- 60 A. Income StatementB. Cash Flow StatementC. Balance Sheet Statement D. Financial Analysis

Appendix

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Executive Summary

The Big O doughnuts

The Big O doughnuts are healthy baked doughnuts with sugar-free dips and yogurt

filling. The doughnut itself comes in two variants: Original and Wheat. These variants are

additionally flavored with sugar-free chocolate dip, and mango, strawberry, pineapple, or vanilla

flavored yogurt filling. The Big O doughnuts are low in calories and product variants have the

added benefits of wheat germ and yogurt. The Big O also offers flavored chocolate drinks in

strawberry and peanut butter variants as the ultimate complement to its healthy doughnuts.

The Big O is a playful brand name that immediately captures the attention of consumers

from the product’s target market, attracting them to The Big O kiosks and stalls serving high

quality healthy treats in a fast and friendly manner. The brand name connotes a certain fullness

and satisfaction that the company aims to provide its customers with a light, delightful feeling

that promotes the fun dynamically energetic aura of a healthy lifestyle among the Filipino youth.

The Big O doughnuts will be offered as a healthy alternative to current doughnut industry

offerings primarily targeting a niche market composed of students and young adults with excess

disposable income from the middle upper class of low A to broad B socio-economic classes.

These include teenagers, young professionals and other people in their twenties and thirties

residing in Metro Manila. They live active lifestyles and can often be noted to frequent malls,

bazaars, cinemas and gyms during their free time. These targeted consumers are attuned to the

growing health trend in the country and are greatly influenced by it. They are impulse buyers

who have the age and background to appreciate the joys of doughnuts.

Financial Features

The Big O aims to generate Php 122,000 in sales revenues for the first trimester of

operations. Furthermore, the business has an average profit margin of 35%, making it a

profitable venture from the get-go. The business will be financed solely by the owners’ capital.

Total initial investment required is estimated at Php 5,000 per member, or Php 55,000. The table

below details the initial investments.

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Major AchievementsThe Big O is confident in its product offerings as the company has received highly

encouraging, positive feedback from random product sampling sessions conducted over the last

three months. The Big O is enthusiastic about its future in the doughnut industry in the months to

come. The following table details the objectives and sustainability of the product.

Time frame ObjectivesYear 1 – Successful entry into the market

The Big O Doughnuts will be launched in Ateneo and free samples will be given to potential consumers. Participation in school bazaars and outside events.

Year 2 – Expand to wider customer base

Increase promotions to reach wider audience. Adding new flavors to suit the variety of preference in the expanded market Catering services for parties, university and corporate events. Open up our own permanent stall in a school or office cafeteria.

Year 3 – Extend product line and capacity

More flavors for the existing product line. New healthy product line of other desserts and healthy sandwiches. Increase distribution networks through good client and supplier relationships. Pour in retained earnings to optimize production processes Open up a stall in a high-traffic mall.

Year 4 – Expand stalls to other venues, open up a café

Open up more stalls in malls and food courts Expand to a café type setting for one branch of The Big O Doughnuts

Year 5 – Franchising options and higher market share

Open up more stalls in malls and food courts Expand to a café type setting for one branch of The Big O Doughnuts

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Initial working capital of PhP 5,000.00 per member

PhP 55,000.00

SEC filings, business registration, and similar procedures

1000.00

Market testing and product sampling 1000.00

Advertisement 1500.00Equipment maintenance 1000.00Transportation 1500.00Stall 10000.00Purchases (Initial Supplies) 32500.00Rent Deposit 6500.00Total Initial Expenditures 55000.00

I. Market and Industry Background

A. Industry Structure and Industry Growth

The fast-food market has grown rapidly over the past ten years with a proliferation of local and

foreign establishments. This has been spurred in part by a relaxation of restrictions on foreign

entrants and by the slow but steady rise in per-capita GDP of about 1.4% per year over the past

decade, according to the World Bank. Food consumed outside the home has risen steadily from

3.8% of total family spending in 1991 to 4.9% in 2000, according to government figures, a jump

from 24.6 billion pesos in 1991 to 89.2 billion pesos. The chart below shows the market value

each classification.

Figure 1 percentage of fast food industry

The most popular fast food establishments in the industry are those under the restaurant

sector serving food such as hamburgers, chicken meals, pizza and ethnic food. But when it

comes to the side of the industry that leans towards the snack portion of consumerist diets, in

other words the baked goods portion of the industry, the pack is being lead donuts. Donuts are

undoubtedly one of the country’s favorite snack foods as the proliferation of donut shops in the

country today shows. Brands like Dunkin Donuts, Go Nuts Donuts and more recently the Krispy

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Kreme Donuts, have gained a steady following. More recent entrants include those developing a

mini-donuts sub-sector in the industry such as the competitor Lil Orbits. DPI reckons the

doughnut market in the Philippines is worth about 3.8 billion to 4 billion pesos a year.

Taking note of the figures in Table 1 we see a fairly stable level of expenditure by the

average Filipino consumer on food and non-alcoholic beverages within the 1990-2015 period.

The highest percent of spending (nearly 40% of total expenditure) is directed towards this

category, under which The Big O falls. These expenditures are expected to amount to a total of

1.6 trillion php by 2015.1

Table 1 Consumer Expenditure by Purpose (% Analysis): 1990-2015

% of total consumer expenditure

1990 1995 2000 2005 2010 2015

Food and non-alcoholic 38.28 38.36 38.37 37.43 37.67 38.37

beverages

Alcoholic beverages and 1.78 1.78 1.78 1.62 1.65 1.56

tobacco

Clothing and footwear 3.27 3.00 2.70 2.74 2.93 2.96

Housing 21.17 21.21 21.22 22.48 21.98 21.81

Household goods and 4.95 4.96 4.96 4.92 4.86 4.67

services

Health goods and 1.88 1.88 1.88 1.57 1.61 1.60

1 Ibid.9

medical services

Transport 6.73 6.74 6.74 7.86 7.85 7.67

Communications 0.50 0.56 0.83 0.84 0.89 0.85

Leisure and recreation 0.49 0.50 0.50 0.47 0.47 0.44

Education 4.15 4.16 4.16 3.85 4.02 4.20

Hotels and catering 4.95 4.96 4.96 5.19 5.41 5.57

Misc goods and services 11.87 11.89 11.90 11.05 10.67 10.29

TOTAL 100.00 100.00 100.00 100.00 100.00 100.00

Source: National statistical offices, OECD, Eurostat, Euromonitor International 2

2 Ibid.10

Though minimal concrete data on the industry is available, the doughnut industry in the

Philippines is of an arguably respectable size and as can be seen by the brisk business being

done by current competitors in the industry, a rather attractive one. Despite the many

competitors within the present day industry, it remains an appealing venture for

companies able to pursue a differentiation strategy and offer consumers something that

others cannot. The market is currently characterized by stiff competition among the

various competitors in the industry for whom no significant differentiation exists other

than in the matters of taste and price. The Big O intends to base its differentiation on an

entirely different aspect hitherto unknown in the realm of doughnuts: health. The product

endeavors to set itself apart from competitors unanimously offering fatty fried concoctions

in the market today.

B. Opportunity within the Industry

The Philippines is one of the countries with exceptionally high sugar consumption. This

can mostly be attributed to the inherent Filipino sweet tooth and the success of the fast food

culture within our heavily westernized society. Given the levels of intake as illustrated in figure

2, Filipinos are more prone to obesity and diabetes as well as certain other chronic-dietary

diseases that have been gaining recognition as a danger to health in recent years.

Figure 2 Sugar consumption

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According to WHO, by 2030, it is expected that most of the diabetic sufferers would be

living in Asia with respect to the rising diabetic rates. India is the biggest home to the diabetics

housing 33 million cases, China with 23 million cases, and Pakistan and Japan with 9 and 7

million cases respectively. Health indicator statistics from the DOH have pegged diabetes as the

ninth leading cause of death in the Philippines. There are an estimated 3.36 million suffering

from the disease today, meaning that 1 out of 25 Filipinos are affected by diabetes. 3 The

incidence of diabetes among people living in Luzon is said to be 5.1%4

Resulting in high blood glucose rates, diabetes is often seen to affect the eyes, kidneys,

nerves, and heart that would eventually lead to acute and chronic complications such as loss of

vision, kidney failure, amputations, and heart disease. These health problems will adversely

3 Bio-Medicine.org. Diabetes on the rise among Filipinos.[http://www.bio-medicine.org/medicine-news/Diabetes-on-the-Rise-among-Filipinos-15022-1/] Accessed: July 3, 2009.4 Jane C. Baltazar et. Al. Prevalence and correlates of diabetes mellitus and impaired glucose tolerance among adults in Luzon, Philippines. [http://www.journals.elsevierhealth.com/periodicals/diab/article/PIIS0168822703002821/abstract] Accessed: July 4, 2009.

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affect the quality of life as well as increase the health care progress and might thus decrease the

productivity of the country. (see Figure 3: Tree of Life)

Obesity, on the other hand, impedes on the work productivity of the employee.

Overweight and Obesity are clinically defined as having a Body Mass Index (BMI) over 25 and

30 respectively. Obesity significantly increases the likelihood of health problems such as type 2

diabetes, high blood pressure, high cholesterol and triglycerides, coronary artery disease (CAD),

stroke, and sleep apnea. These and the added stigma attached to body image problems also

impacts and individual’s productivity.

One of the 25 global consumer trends in 2008 is “a focus on health and wellbeing but

with a parallel growth in obesity” as predicted by Euromonitor International. Many Filipinos find

themselves subscribing to this trend and respond well to products labelled as healthy despite

having a higher price tag. 5 Many young people today enroll in gyms and follow a diet to live

healthier and to have a better body image. data gathered from the NUTRISTAT Protocol at St.

Luke's Medical Center (1999 - 2000), states that 34% of the total admitted patients are

malnourished and rouhly one-fourth of them are obese. There was more overweight (2/3) than

undernourished (1/3) patients6. FNRI data from 1998 reveals an incidence of overweight and

obesity in the Philippines of 16.9%. Coupling this information with the established steady

growth of the fast food industry and the lifestyle it encourages, the current estimates of

overweight and obesity in the country have increased to 25%7

5 "Consumer Lifestyles - Philippines." (2005): Euromonitor International. [Database online.] 04 May 2005.6Asian Bariatrics. “Morbid Obesity presents clear and big risks to our health, Filipino experts say.” http://asianbariatrics.rxpinoy.com/new_challenge.html. Accessed August 3, 2009.7 Rosa Allyn G. Sy. “Prevalence of Obesity in Medical Practice in the Philippines”. http://www.iotf.org/oonet/philippines.htm. Accessed: August 2, 2009. “Beating Obesity”. Philippine Daily Inquirer. June 14, 2008.

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Table 2. Five Leading Causes of Mortality among Filipinos, 2004

Cause Rate per 100,000

Population

Percent of total

deaths

1. Heart diseases 84.8 17.6

2. Vascular system diseases 61.8 12.8

3. Malignant neoplasm 48.5 10.1

4. Accidents 41.3 8.6

5. Pneumonia 38.4 8.0

Cardiovascular conditions, diabetes and obesity have become a primary concern in the health

industry today. All three—and as chronic-dietary diseases, the last two in particular—are directly

correlated with personal choices of nutrition and lifestyle. Alteration of these personal choices

has an impact on these conditions. In addition to all this, young adults, aged 20-29 and with a

tendency to eat outside are more susceptible to hypertension—which is only compounded by

such external sources (such as those derived from work, home, traffic, etc.).8 These rising

directly diet related health issues in the country today are prompting Filipinos to watch what they

eat and makes the need for healthy versions of all time favourites such as The Big O quite

prominent.

II. Business Concept and Envisioned Future

8 "Street Stalls/kiosks - Philippines." (2008): Euromonitor International. [Database online.] Feb 2008.

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A. Business Concept

The Big O doughnuts are healthy baked doughnuts with sugar-free dips and yogurt

filling. The doughnut itself comes in two variants: Original and Wheat These variants are

additionally flavored with sugar-free chocolate dip, and mango, strawberry, pineapple, or vanilla

flavored yogurt filling. The Big O doughnuts are low in calories and product variants have the

added benefits of wheat germ and yogurt. The Big O also offers flavored chocolate drinks in

strawberry and peanut butter variants as the ultimate complement to its healthy doughnuts.

The concept will make money through selling not only the doughnut itself but the

experience of eating a sweet, guilt-free treat. The doughnuts will be sold per piece, or in boxes of

three and six. The fruit-infused chocolate drinks will also provide additional revenue, as with the

combo treats that come with offering doughnuts and drinks together. Franchising will become an

option in the future once brand image has been established. This model can be sustained, through

aggressive marketing strategies, which highlight the stall as the first to offer doughnuts in a

healthy food experience.

The Big O is a playful brand, promoting a fun, full and satisfyingly healthy

lifestyle. This playful and fun image is a direct attempt to appeal to the target market. It is short

and catchy, reinforcing the statement the company wishes to make with its products: That health,

goodness and fun can mix. The company will be living proof that health and indulgence are not

mutually exclusive. It is not necessary to give up the benefits of living and eating healthy and

the joys of a sweet treat at any time of the day. The Big O does not want their consumers to have

to make this choice.

B. Customers

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. Given that the unique thing about The Big O is its healthy nature the product will be

marketed to a segment of the population that appreciates and seeks out this quality. The company

has identified teens and yuppies (young professionals or adults in their 20’s and 30’s) in the

upper middle class of low A to broad B as the most receptive to The Big O. The company targets

both males and females though the latter is generally more conscious of diet nutrition and image.

It is this demographic that is most attuned to the growing health trend and has the disposable

income to pursue premium products directed towards this purpose. (Euromonitor International)

The target market is geographically situated within Metro Manila and is concentrated in

universities, business districts and call centers. They also frequent malls, after school hangouts

and bazaars. The older members of this segment have also taken to frequenting gyms to live

healthier and build a positive body image.9 The typical customer for this product will include

active, health-conscious students and young professionals looking for an alternative guiltless

snack and doughnut consumers looking to shift to a healthier snack that still fulfills their hunger

cravings.

C. Risks in the Business

As with every business venture certain risks are involved. One of the biggest risks that

the company faces is entering an industry with such high levels of competition. There are certain

difficulties encountered when penetrating a market with so many direct and indirect competitors

present. Among the direct competitors are Dunkin Donuts, Mister Donut, Go Nuts Donuts,

Krispy Kreme, as well as smaller competitors like Cellos, Happy Haus Donuts, Hot Loops. All

9 "Consumer Lifestyles - Philippines." (2005): Euromonitor International. [Database online.] 04 May 2005.

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other pastry products or sweet food items are taken as indirect competition for those consumers

just looking to get their “fix” and fulfill the basic need of food and craving satisfaction.

Penetration of other new firms in the industry, given low capital requirements and

normally low switching costs to consumers, is another main concern that The Big O faces. With

all these competitive offers the company maintaining customer loyalty becomes of high value.

The Big O’s response to these threats is in the strengthening of its position as a healthy

alternative offering what no other doughnuts can. In line with this continuous product

development is needed to ensure that offerings continuously surprise and delight the customer.

.The next major risk that the company faces concerns its limited capital. Increasing rent

rates in bazaars and for stalls pose a notable risk for the company. This calls for careful

deliberation on stall location and which bazaars the company will participate in. Access to the

taret market through these selections is vital to ensuring the maximization of the portion of

capital infused into location funding.

Additionally the company must ensure the stability of its supply source for raw materials.

Despite the fact that doughnuts are basically made from commodity products, quality of certain

key components is still crucial. External economic forces and fluctuations in supply may affect

the price and availability of these ingredients and affect the profitability of the firm. The only

remedies for this exist in strong supplier relations and contigency plans..

D. Key Factors for Success

There are four major considerations that are crucial in establishing the success of The Big

O. The First key success factor is the health and wellness trend which the company uses as the

foundation for The Big O doughnuts. With the growing concerns of diet related illnesses and the

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stigma proliferated by the media attached to being overweight, consumers are becoming more

conscious of their health and are beginning to look for products that will fulfill their wellness

needs. The Big O believes that catering to this health trend will infuse something new and

exciting into a matured industry.

The company’s next major consideration is in enabling extensive promotions and

exposure. Because this kind of product is unheard of in the industry the firm must create

visibility and awareness to attain higher sales. This is also necessary for the firm to establish a

differentiation between its products and those currently available in the industry. It also enables

the firm to penetrate the minds of their target consumers and entice new customers.

Quality and Affordability are important, linked considerations. As consumers today are

much more difficult to please, a product has to provide both quality and value for money to

succeed. This can be achieved through thorough and efficient operations and is of great

importance as these factors can increase customer loyalty and repeat purchases.

It is also important for The Big O to offer rich variety through product innovation to

satisfy the aggressive demands of the present day consumer. Product development must be

geared towards producing flavors and variations that appeal to the target consumers as well as

the cultivation of different product lines for the future. Such expansion is not restricted to

doughnuts but also covers drinks sandwiches and possibly even full meals.

E. Feasibility

The doughnut industry is currently in the mature stage, and with the number of

competitors rivalry is very high. There is a low bargaining power for suppliers because the

ingredients are mostly commodities. There is a moderate bargaining power for consumers which

was lowered by the pioneering vision of The Big O as the first healthy donuts in the country. 18

However, there is a very high threat of substitutes for sweet products such as other doughnuts

and pastries since consumers have a myriad of choices facing them when buying sweet snacks or

desserts. A more detailed analysis can be found in the Porter’s Five Forces analysis in the

appendix section.

The newcomer can only succeed by offering something radically new that can shake up

the market. Even if the donut industry is already very competitive, many consumers shy away

from the current donut products because of the high sugar and fat content. It is this segment of

the market that the company wants to tap. As for high threat of substitutes, this can be combated

as long as the product delivers great taste and good value for the customers. Upon entry of the

The Big O into the market, it offers something unprecedented in the donut industry – a menu

revolving around a line of healthy doughnuts. The business will thus rally on its first mover

advantage in its positioning and develop a solid niche market.

Going into this business is attractive and reasonable because there is an opportunity in

filling the void of the healthy doughnut market. Although there are some baked/healthy variants

for the doughnut sellers today, no doughnut company has yet positioned itself to offer primarily

to the health conscious. The fruit-infused chocolate and coffee drinks are also new products that

could appeal to the market. Furthermore, going into business is also attractive since the group

has connections with skilled pastry bakers and the central office of Mister Donut.

The trend towards and subsequent proliferation of food stalls and kiosks shows a

particular characteristic of the Filipino consumer as an impulse buyer and is something that the

company intends to exploit. In the Philippines, “food and drink offerings are still based around

impulse foods such as fried menu items, pastries or ice cream, which are mostly sought by

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consumers to indulge themselves when on the move”.10 Establishing the business in a kiosk type

of set up would help cater to this particular consumer buying habit and offer a convenient avenue

for product purchase. Stalls and kiosks are also highly customizable, which presents further

opportunity to pull in consumers with fun looking, attractively designed stalls. Due to the smaller

scales stalls also require much lower financial capital input than a full sized café or store.

Market feasibility has been ascertained through the positive overall reception of

the product in the surveys and focus group discussions conducted over the past three months.

The strong demand for healthy products as dictated by the current trend also drives the salability

of the product. Technically speaking these healthy doughnuts are feasibly produced as will be

discussed in detail in later parts of the paper. Instead of frying the doughnuts, they will be oven-

baked and this has already been done by one of the group members. The use of sugar-free

sweeteners and wheat as key ingredients is proven by extensive research. The only operational

challenge for the product is the storage and maintenance, including the shelf life of the raw

materials and work-in-progress. Financially, this business is also feasible since it does not

require heavy capitalization, and can be started in a small, stall set-up scale. Details for

feasibility will be discussed more thoroughly in the succeeding sections of the business plan.

Vision/Mission/Objectives

Mission

Golden Halo Inc. strives to give the best combination of health, great taste, and affordable

convenience in our products. We will provide the highest customer satisfaction for health-

10 "Street Stalls/kiosks - Philippines." (2008): Euromonitor International. [Database online.] Feb 2008.

20

conscious sweet lovers by providing them with excellent products and service that cater to their

needs. Through constant innovation, we will transform guilty food into guiltless delights. As the

pioneer of healthy donuts, we will come up with a wide variety of forms and flavors which will

reinforce the mindset that healthy and tasty can go together.

Vision

Guiltless eating pleasure will become synonymous with our company and our products. Our

products will be recognized as the best value for their excellent quality and value. We will be the

healthy sweets of choice for the people. Our customers will feel light and delighted whenever

they consume our products. We will be among the top five donut shops in the country within

eight years.

Objectives

The company will be pursuing its strategy based on the objectives set by a five year plan. The

following goals and objectives within the stipulated time frame will guide the company in its

envisioned direction.

Table 3: Objectives timeline

Time frame Objectives

Year 1 – Successful

entry into the market

The Big O Doughnuts will be launched in Ateneo and free

samples will be given to potential consumers.

Participation in school bazaars and outside events.

Year 2 – Expand to

wider customer base

Increase promotions to reach wider audience.

Adding new flavors to suit the variety of preference in the

expanded market

Catering services for parties, university and corporate events.

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Open up our own permanent stall in a school or office

cafeteria.

Year 3 – Extend product

line and capacity

More flavors for the existing product line.

New healthy product line of other desserts and healthy

sandwiches.

Increase distribution networks through good client and

supplier relationships.

Pour in retained earnings to optimize production processes

Open up a stall in a high-traffic mall.

Year 4 – Expand stalls

to other venues, open up

a café

Open up more stalls in malls and food courts

Expand to a café type setting for one branch of The Big O

Doughnuts

Year 5 – Franchising

options and higher

market share

Open up more stalls in malls and food courts

Expand to a café type setting for one branch of The Big O

Doughnuts

III. Business Model

A. Value Proposition

The doughnuts being sold in the market today are traditionally fried and respond to the

Filipino’s natural craving for sweet snacks by layering on thick coats of sugar and artificial

flavoring resulting in a high calorie product that though quite delicious, can be detrimental to

your health. With the rising trend towards health-consciousness, consumers find themselves torn

between caring for their bodies and satisfying their desire for tasty treats. The Big O offers them

a solution by providing a healthy alternative to the high calorie doughnuts available in the market

and thus a solution to their dilemma.

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Value Statement

The Big O Doughnuts aim to encourage a healthy Filipino lifestyle by offering their

consumers a healthy way to enjoy their doughnuts. These doughnuts encapsulate delightful

healthiness in a delicious low calorie snack.

Product

Golden Halo Inc. fills a void in the market with The Big O Doughnuts: a deliciously

healthy alternative to the high-calorie doughnuts being sold by all the other doughnut

establishments in the country. The product will be marketed as a better, healthier alternative to

the popular but fatty donuts abound in the industry today. The Big O Doughnuts offers low

calorie treats with even healthier variants. Through the use of yogurt, wheat flour (whole and

enriched), and sugar substitutes, The Big O gives provides its patrons with more health benefits

and fewer calories. The doughnut dip and fillings come in a variety of delightful flavors such as

chocolate, mango, strawberry, pineapple, and vanilla. The special formulation of these doughnuts

result in a tasty bite of health will keep The Big O customers coming back for more.

To cater to the discriminating needs of the company’s target market, The Big O

Doughnuts will also be offering customizability options for the doughnuts that customers

purchase. The stalls will have a dips selection consisting of the mentioned yogurt flavors and

chocolate dip which would allow our customers to mix and match flavors for a more satisfying

doughnut experience.

Aside from the core product that is doughnuts, The Big O Doughnuts will also offer

drinks that will enhance the dining experience of its customers. It will offer hot or cold chocolate

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drinks infused with strawberry or peanut butter. These drinks will be offered as standalone or

combo purchases in order to give better value to customers. The pervading and unifying themes

of all the products will be the low calorie aspect, the fun, dynamic flavors and the healthfulness

infused in our offerings.

Values from the customer’s perspective

Low calorie content

Calories are a unit of measurement for energy. The recommended calorie consumption

for an average adult is estimated at 2700 for men and 2000 for women. Though calories are

needed by the body to function an excess intake of calories that cannot be burned in one’s day-

to-day activity leads to weight gain and in extreme cases obesity. The health implications of

being overweight are well known and include: heart diseases, stroke, diabetes, high blood

pressure, sleep apnea, osteoarthritis and even certain types of cancer. By limiting sugar content

through a mediated isomalt-sugar mixture and using only the best healthy ingredients, The Big O

Doughnuts are lower in calories than other doughnuts in the market. Studies show that in

addition to avoiding weight gain and its subsequent health problems, low calorie diets have the

added benefit of improved cardiac performance levels.11

Whole wheat flour

Whole wheat flour is a type of flour retaining the bran germ that are usually discarded in

the processing of regular white flour. Wheat germ is a veritable source of nutrients including B

11Jim Dryden. Heart benefits from a low-calorie balanced diet. http://www.medicalnewstoday.com/articles/36124.php. Jan 14, 2006

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vitamins, Calcium, Fiber, Iron, Magnesium, Manganese, Omega-3 fatty acids and Vitamin E

among other things. These nutrients (including phytosterol which lowers cholesterol and benefits

the heart) produce such benefits as lowered blood pressure, aids in nervous system functions, and

reduces risk for type 2 diabetes. The high fiber content of wheat flour also improves

gastrointestinal health, reduces the risk of heart disease and prevents weight gain12. By using this

type of flour for its wheat variant, The Big O Doughnuts pass these benefits on to their

consumers.

Yogurt Dips and Fillings

Yogurt is a fermented dairy product made by adding bacterial cultures to milk, which

causes the transformation of the milk's sugar, lactose, into lactic acid. Yogurt is a viable source

of calcium for lactose intolerant individuals and in fact has even higher calcium content than

milk due to the actions of the bacteria culture. In terms of nutritive content yogurt is considered a

good source of protein, calcium, riboflavin zinc, potassium, protein, and B vitamins (B2, B5,

B12). Additional health benefits of yogurt stem from its “probiotics.” Health benefits of yogurt

include boosts to the immune response, improved digestive health, promotion of burning of fat

and building of bones and reduce the risk of high blood pressure13. Glazes and fillings present the

highest concentration of sugar in most doughnuts but in The Big O Doughnuts it becomes a

source of healthful benefits.

Table 4: Calorie Content comparison

Variant Dunkin Donuts Krispy Kreme The Big O

Original Wheat

12 Jennifer Murray. Nutritional Benefits of Wheat Germ. Feb 17, 200913 Elaine Magee. The Benefits of Yogurt

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Plain Glaze 220 200 165 148

Chocolate Glaze 230 250 166 149

Filled 250 300 171 154

Market Segment

Demographics and Psychographics

. The chosen target market is composed of discerning, health conscious individuals who

experience an underlying conflict between their health concerns and desire to indulge. These

consumers are constantly looking for healthy versions or alternatives to their favorite products.

The company has identified teens and young professionals from the upper middle class as most

fitting the chosen profile. As having the background to appreciate doughnuts and the privilege to

prioritize their health, these low A to broad B consumers are the most receptive to the benefits

offered by The Big O and the most likely to pursue products of its nature. The firm targets both

males and females though the latter is generally more conscious of diet nutrition and image.

The target market is geographically situated within Metro Manila and is concentrated in

universities, business districts and call centers. They also frequent malls, after school hangouts

and bazaars in their spare time. The older members of this segment have also taken to

frequenting gyms to live healthier and build a positive body image.14

As they are constantly on the look out for products that will satisfy their exacting

standards these consumers are attentive to new offerings in the market and are adventurous

enough to try new things particularly if they appeal to their sense of health and wellness. They

14 "Consumer Lifestyles - Philippines." (2005): Euromonitor International. [Database online.] 04 May 2005.

26

will choose to pay special attention to products that cater to their busy on-the-go lifestyle and

impulse buyer nature. More often than not they will choose items that are delicious, filling and

easy to eat. The company makes use of the focus differentiation strategy by addressing the needs

of this specific niche in the market.

Competitive Strategy

The Big O will be employing a focus-differentiation competitive strategy as a company

endeavoring to establish itself as a unique player in the industry with a new revolutionary

product. The firm aims to provide their target customers with benefits that are currently not

offered in the current product offerings of the industry. These healthy doughnuts cater to a void

in the industry creating a special need driven by today’s consumer’s demand for high quality

products that cater to their dreams of health and wellness without sacrificing the pleasure of a

tasty snack This has come to the industry in line with the recent health trend. The Big O believes

that offering this kind of value in the industry will reap returns in the form of consumer’s

willingness to pay premium prices for our product. The focus strategy comes into play in

recognizing that we are catering to a very specific group of health conscious consumers.

However the company aims to expand its base and capture even the not so health concerned

individuals through the quality of their product and proper spread of information to aid in

spreading the trend.

IV. Market Strategies

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A. Target Market

The target market can be easily illustrated through four segments. Summary of Consumer

Profiling can be viewed in the Appendix.

Demographic

The Big O will be targeting consumers ranging from 18 to 35 years old, both male and

female, who are either college students or working professionals. These consumers have

to belong to the upper middle classes of low A to broad B.

Geographic

The target customers live in Metro Manila, primarily in universities, business districts,

malls, and call centers. However, the early stages of the business will focus on Ateneo,

org events, and food bazaars.

Psychographic

Health-conscious consumers looking for healthier versions of unhealthy products will be

targeted. They also have to love sweets, particularly donuts. These people are

adventurous enough to try new things but responsible enough to care about their welfare.

Behavioral

Busy, stressed and constantly on-the-go, the target consumers will look for something

that is delicious, filling, and easy to eat. They have no time or space to eat full, balanced

meals; hence they resort to unhealthy snacks and sweets. The healthy fruit donuts will

serve as a convenient, delectable treat for these people.

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Bulls Eye Target - Active and Health-conscious College Students and Young Professionals in

Metro Manila belonging to AB Classes

a) Lienne Chai represents the image-conscious, active and overworked college student. She

is currently a 20 year old senior studying AB Communication at the Ateneo de Manila

University. Because of the heavy load of her academics and extra-curricular activities, she

often gets stressed out. As a busy college student she often resorts to quick snacks and

unhealthy sweets including doughnuts. Lienne is a closet doughnut lover, loving the

sweetness of this guilty pleasure but hating the thought that every doughnut she eats goes

straight to her hips.

b) Jerry Go represents the modern and savvy young professional. He is currently a 35 year

old entrepreneur trading toys and candies. He loves to search for the latest trends in food,

business, and technology, and counts himself as a discriminating customer. Although he

loves to eat, he always takes caution because he comes from a family of diabetics. His love

for sweets takes a backseat in favor of his priority that is his health. He is on a constant

lookout for food that will both satisfy his cravings and benefit his health.

POSITIONING

Identified Marketing Opportunity

Upon entry of The Big O product into the market, it offers something unprecedented in

the donut industry – healthy donuts. The Donuts have the image of being fat and unhealthy, but

this product aims to reinvent the image of donuts from a guilty pleasure to a guiltless delight.

Although there are some baked/healthy variants for the donut sellers today, no donut company

has yet positioned itself primarily on the health aspect. Furthermore, the core product of donuts

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will be reinforced with the fruit-infused chocolate drinks. The company will employ the focus

differentiation strategy to address the specific needs of health-conscious or even diabetic sweet

lovers.

Positioning in the Market

o It will position itself as the first healthy donuts in the country, while employing focus

differentiation for the target customers.

o Target trademark of the product: It offers high-quality donuts with a consideration for

health, taste, and good value.

o It will sell the experience of eating a sweet guilt-free treat without having to worry about

unfavorable effects.

o Unique Selling Proposition: “From a guilty pleasure to a guiltless delight.”

o Slogan: “The healthy doughnuts that make you go O!”

o The positioning of the company is made in a way that will first register the idea of a

great-tasting donut in the minds of the consumers before we will introduce the idea of a

healthy donut to them.

o It concentrates on the upper end of the middle-priced market, being more expensive than

regular doughnuts such as Mister Donuts and Dunkin Donuts but being careful to remain

below the price ranges for other premium doughnut competitors such as Krispy Kreme.

PRICING

The pricing strategy of Healthy Fruit Donuts is based on market-oriented pricing with the

assumption that the customers are inelastic/insensitive to price changes.

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The prices of the products are based on the prices that the target market was willing to pay

for the products.

The pricing scheme will be as follows:

Product Selling PriceOriginal Glazed Doughnut Php 18Wheat Glazed Doughnut Php 20Yogurt-filled Original Doughnut

Php 22

Yogurt-filled Wheat Doughnut

Php 25

Yogurt dips Add Php 5 for every dipFruit Chocolate Drink Php 20 (regular) Php 25

(large)

Combo pricing will also be employed. Drink+donut combos will also be introduced, as

with half dozen and one dozen orders. This will provide more options for the customers.

More detailed costings are found in the operations section of the paper.

SALES POTENTIAL

Upon the start of operations and up until the short term time frame, the company might

find it hard to make a noticeable mark in the whole doughnut industry and to pose a big threat

against its major competitors due to its limited operational capacity and geographic reach as a

small start-up company. However, the company firmly believes that its products will slowly but

surely gain acceptance and recognition by offering something unprecedented that addresses a

need of the market today: a healthy donut alternative.

The company strongly believes that its products have a very big potential because it will

capitalize on Filipino’s love for sweets and the market’s need for a healthy alternative which

makes the company’s oil-free and sugar-free doughnuts a strong viable option. Consumers will

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now have a choice as they could give in to their sweet cravings without jeopardizing their health.

This potential coming primarily from the health aspect provided by the products will be

intensified once consumers know that the company is the first doughnut company to offer a full

range of products catering to health conscious individuals.

Aside from the health aspect, the product’s main success drivers will be its taste and

appeal to consumers. These two product characteristics, taste and appearance, will also play a

vital role in determining the product’s sales potential all throughout the product’s life cycle. Its

physical appearance will attract consumers to try the product while its taste will keep consumers

on buying the product more and more. Therefore, it is important for the company to employ

quality control processes to ensure that the products are produced within company quality

standards at all times.

PROMOTIONAL PLAN

Upon its entry, the company will aggressively introduce and market its products and

brand name as the first healthy doughnut company in the country. The company realizes that its

successful entry and sustainability in the market heavily relies on its ability to effectively create

product visibility, brand awareness and brand equity. Given the limited budget constraints, it will

have to do with readily available resources to promote and make its product known to its

consumers and other prospective buyers.

Packaging

The product’s packaging, displaying the product name and logo, is one simple way of

establishing brand equity and recall in the mind of the consumers. Attractive packaging also

serves as free advertisement striking curiosity and proliferating brand image (figure 2). For per

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piece sale transactions of less than three doughnuts, packaging will come in the form of

environmentally-friendly paper bags while three and half-dozen purchases will be packaged in

boxes for convenience. The flavored chocolate drinks will come in styrofoam cups of various

sizes.

Figure 1 sample packaging

Internet – facebook, multiply, yahoo!groups

The company will also utilize the Internet through various social networking websites

such as Facebook, Multiply and Yahoo!groups to further introduce and market the company

brand and its products. Since the company will initially start its operations inside the University

targeting Ateneo students, online marketing will be an easy and economical way of information

dissemination and product advertising especially when the chosen target market is very familiar

with and has access to such technological advancements. From first degree relations, friends to

friends and family to family associations, this can work all the way out to higher degrees of

relations and can spread through word of mouth therefore reaching a greater number of the target

market.

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Events

The company will also take part in different events and bazaars inside and outside the

school campus wherein the target market can be reached. It will create partnerships with

different organizations inside the University to provide food and drinks during their general

assemblies or just even conduct product sampling to establish product visibility and brand

awareness. It can also join other food bazaars in different schools and geographic areas

especially during Christmas season and the New Year to penetrate into the market even further.

Flyers/Posters

Flyers and Posters can also be an effective promotional tool for the company. Creatively

designed and informative in content, they will be given away during events and bazaars to strike

curiosity among potential customers and entice them into trying and buying our food products.

This will help in creating awareness among and disseminating information to consumers on what

the company and its products is all about. The design of the posters emphasize a fit, healthy

lifestyle while emphasizing the Big O brand through the attractive models and sumptuous

donuts.

DISTRIBUTION

Distribution channels will be simplified and targeted, especially for the initial phases of

the operation. The company intends to sell in kiosks spread out through the University (similar to

Figaro and the calculated placement of vendo machines). This allows not only the emphasis of

our product being a healthier and equally delightful alternative to buying manufactured sweets in

vending machines (like Pillows), but also the increase in visibility and brand awareness.

Other than this, partnerships with Ateneo’s student organizations are the best choice for

the company early on to improve brand equity, brand awareness, and product visibility. Product

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sampling can be done for these organizations’ small-scale projects (such as 1.5 hr seminars

intended to immerse applicants into organization’s culture and key functions) that restrict 30 or

more students to one location for a given period of times allows us to exploit short term captive

markets. With a heightened probability of taste-testing the product, brand equity can be built

upon. Direct advertising can also be done here.

Product selling in these organization’s large-scale events and bazaars such as LFC’s

Under the Stars project, AMA Mall, Celadon Week, AMA Bazaar, can also be pursued as

distribution channels. Furthermore, the company will participate in outside food bazaars.

Partnerships with organizations and the installment of kiosks beyond the scope of Ateneo

will also spread visibility and increase brand equity once the company has reached a sufficient

level of awareness and market share in the University.

In the long-term, the company hopes to establish its own stall in a high-traffic area near

the target market like the university belt or call center areas in Ortigas and Eastwood.

Projected Market Share

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There are four major competitors in the doughnut industry, Mister Donut (19% share),

Dunkin Donuts (14% share), Gonuts Donuts! (11% share), and Krispy Kreme (12%).

Overall, 56% of the total market share is dominated by major competitors in the industry, with

the remainder captured by multiple firms. Keeping this in mind, it is hoped that the company is

capable of acquiring 0.11% of the market share by the end of year 1. On year 2, this is expected

to jump to 0.19%, and then to 0.3% on year 3.

The market share is derived from appropriation of the growing health trend, the target market’s

perception of quality taste of the product, the market shares of the established donut sellers, and

the current growth rate of the industry. Market share acquisition has been conservative due to the

high competition between major and minor competitors.

Year 1

0.1% of market share captured

Due to health benefits, taste

quality, and initial market

development

Year 2

Improvement to 0.5%

Due to increased advertising

and improvements in

operations and brand equity

Year 3

Improvement to 1%

Constant improvement in

product development and

operations allows competition

with Gonuts Donuts and

Krispy Kreme.

V. Competitive Analysis

Bakery products fast food grew the most in sales value terms with a rate of 11% in 2007 and

11.6% in 2008. This growth pushed sales value to more than P4 billion from different outlets

across the Philippines. Most of the sales come from normal bakery stores, with doughnut stores

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such as Mister Donut and Dunkin’ Donuts increasing in popularity as this has become a common

dessert and an easy way to fill an empty stomach. Filipinos like doughnuts to the extent that an

enormous number of independent doughnut producers have entered the market in the last few

years. Among them are Go Nuts doughnuts and Krispy Kreme, which are priced higher than the

two brands mentioned above. For a more detailed reading of the competitor’s SWOT, see

appendix (Table 2: Competitor’s SWOT)

Major Industry Competitors

Out of the total 3% market share held by Chained Bakery products fast food and another

3% by individual bakery products fast food, the following are the major competitors playing

within the industry.

Competitor Quick FactsMister Donut Mister Donut is owned by Duskin Co., a Japanese group that owns the

franchise worldwide outside the U.S. Taking into consideration the market value of doughnut shops that facilitate more in kiosk/stall types, holding the top-notch position is Mister Donut with 19% of the market.

Dunkin Donuts

Dunkin Donuts is a U.S. chain now owned by Britain-based Allied Domecq. It follows Mister Donut with a 14% of market share for the kiosk/stall type of doughnut business.

Go Nuts Donuts

Go Nuts Donuts products have been modeled on those produced by popular United States doughnut chain Krispy Kreme Doughnuts. Its doughnuts are well known to Manila residents, many of whom travel frequently to the U.S. Go Nuts Donuts opened its doors for business on December 11, 2003 with its first theatre store at Bonifacio Global City. Although at first priced the same as Dunkin Donuts, it was intended for a higher class market. Current market shares are averaged at 10-11%.

Hot Loops Corp.

The name is quite literally put. Hot signifies the freshness of donuts as it is delivered to store outlets fresh from the fryer, freshly frosted, and topped with mouth-watering, irresistibly aromatic flavors. Loops refers to the ring shape that is typically associated to donuts. The company was pioneered by John Gokongwei in 2004.

Happy Haus Happy Haus Donuts is one of the fastest growing donut franchise companies in the country today. From its inception in 2005, it currently has some 400 franchise outlets mostly in Luzon and Greater Manila Area, and the number continues to grow. Their winning strategy of

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marketing low-priced high-quality donuts has proven to be a big hit among budget-conscious consumers. Happy Haus Donuts is also a hit with franchisers because of their attractive franchising schemes.

Krispy Kreme The biggest name yet within the doughnut industry worldwide, this is the latest doughnut chain franchise to capture a significant part of the Philippine market. The franchise was acquired by Kim Fuentebella, whose family also owns the famous Max’s Restaurant. The products are priced for the AB market, and the market share is currently at 12% of restaurant-type doughnut franchises.

1.     Dunkin DonutsDunkin’ Donuts is known and loved around the world for quality menu items and an

unrelenting commitment to customer service. Their customers are passionate about the

Dunkin’ Donuts experience because they can expect a consistently superior product delivered

fast and at a great value and their lives would feel empty without a cup of their daily Dunkin’

Donut coffee. In fact, Dunkin’ Donuts has been ranked No. 1 for customer loyalty in the

“Coffee and Doughnuts” category in Brand Keys Customer Loyalty Engagement Index for

2007, 2008 and 2009.

2.     Mister Donut

Ramcar Inc. introduced an aggressive management policy and revitalized Mister

Donut-Philippines in a bid to attain world class status.  Today, Mister Donut-Philippines is

one of the fastest growing fast food chains with over 700 outlets which include its innovative

tie-ups with 7-Eleven, Shell Select, Petron and other convenience stores, petroleum outlets

and shipping lines nationwitde with future potential franchisees that are ambitious and

dedicated.

3.     Go Nuts Donut

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Go Nuts Donuts’ firm belief that despite the “saturation” situation in the doughnut

industry marked by multinational companies, the doughnut sector was asking for a new face,

new products, and a new taste. Therefore, the company’s first step was geared towards

“market research programs such as test panels, consumer tests, and even disguised selling to

put the product through several trials” ending with fun-designed, “melt-in your-mouth”

donuts. 

4.     Krispy Kreme

Its founder started working in the doughnut sector by selling the doughnuts in his bicycle,

thereby yielding critique conclusions that the owner was able to understand the hardships and

limitations of sending one’s products to and fro. This brought the understanding of keeping

the trade secrets close to heart and try working in the respective departments themselves to

better understand the employees’ incapacity to work. Their motivation to keep on pushing

their product is through the belief “half of our business is done in the AM and the next half in

the PM. So in the morning, we compete with anyone in the breakfast business. In the

evening, we are seen more as a tasty dessert."

5. Hot Loops

Hot Loops is part of the Robina Corp. which is also its source for raw materials. The

name is quite literally put. Hot signifies the freshness of donuts as it is delivered to store outlets

fresh from the fryer, freshly frosted, and topped with mouth-watering, irresistibly aromatic

flavors. Loops refer to the ring shape that is typically associated to donuts. At the start of its

operations in 2004, Hot Loops offered nine distinct flavors designed to tickle the taste buds of

Filipinos everywhere.

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6. Happy Haus

Happy Haus Donuts is one of the fastest growing donut franchise companies in the

country today. From its inception in 2005, it currently has some 400 franchise outlets mostly in

Luzon and Greater Manila Area, and the number continues to grow. Their winning strategy of

marketing low-priced high-quality donuts has proven to be a big hit among budget-conscious

consumers. Happy Haus Donuts is also a hit with franchisers because of their attractive

franchising schemes such as the Happy Haus Donuts and Coca-Cola agreement to give Filipinos

the ultimate in snack combos.

Prime Customer Motivators and Industry mobility barriers

If the inflation experienced in early 2008 continues, costs will shoot up, and will

therefore increase the prices of products from fast food chains. In addition, the world recession

is believed to majorly hit the Philippines by the last quarter of 2009, which will be a general

barricade to the mobility of almost all industries, including the baked products fast food

industry. The rapid price increase in the prices of customary ingredients for baked products will

affect both the supply and the demand sides of the market. It will increase the input price,

hurting the manufacturer, and will most likely decrease the buying capacity of the Filipinos.

Nevertheless, the operators are expected to push through only minimal price increases in order

to keep consumers coming to their outlets.

On a lighter note, the health-promoting menus like salads and sugar-free beverages are

expected to be well patronized, helped by the growing fitness trend among Filipinos. More

innovations are therefore expected in these lines. It is this kind of broad-based demand that

makes snack items such an appealing opportunity for the largest global fast-food chains,

40

particularly as they look to expand beyond the largest urban areas and into less affluent (though

still fast-growing) regional cities.

Furthermore, sector data shows a major increase in the number of chained bakery products

fast food outlets in the country, jumping 15.06% from 2007 to current 2009 figures. Food

service value increased 16% from 2007, and for the whole of the bakery products fast food

industry, doughnut products classify under 92% of the sales of the whole industry. According to

global company researches and international estimates, there is a minimum annual growth of

6.2% in the number of company outlets within the country and 7.68% in forecasted sales for the

next 3 years, yielding to a total of 33.8% and 38.3% in the conjectured growth in percentage of

units and sales from 2007-2012, respectively.

VI. Design and Development Plan

A. Rationale for the design of the development phase

Capital infusions for the business will be provided solely by the incorporators. This translates

into a relatively low starting capital of 55,000 php. This sets particular financial limitations that

call for slower growth with a strategic approach.

Relatively low starting capital.

Product testing and analysis of business operations will be the focus for the first few

months of operation.

Growth is not a primary focus but is instead a long-term objective.

Designed for analysis in order to implement improvements/adjustments to:

o Production process

o Product quality and taste

o Distribution

o Market acceptability

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o Logistics

The aim of the design is to be able to improve and make adjustments to the business

operations, from the purchase raw materials to the production up to sale, in order to attain

the target objectives of the company.

B. PRODUCT DEVELOPMENT GOALS AND PROCEDURES

Our Product:

Healthy donuts will come in two basic options: original and whole wheat.

Flavor variants (for the two options) include:

o Sugar-free chocolate dip

o Fruity-Yogurt filling in mango strawberry and pineapple variants

The unique characteristics that differentiate healthy donuts from existing commercial

doughnuts are:

o Oven-baked instead of deep-fried

o Low calorie

Sugar-free chocolate dip Fruity Yogurt filling

o Comes in whole wheat variant

Product Development

Additional flavors of dips and fruity yogurt filling will be researched, tested and launched

into the market

Complimentary products within the product line

o Low fat flavored chocolate drinks

Strawberry variant Peanut butter variant

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Further improvements to product quality and recipe based on first-hand evaluation

Production Process:

Healthy donut (whole wheat and original)

Sugar-free chocolate dip

Processes

1. Mixing

2. Applying

3, Cooling

Selling and Quality Control: Consumers can choose among variants of whole wheat

or original doughnuts and flavors either Sugar-free Glazing or Fruit-Jam filled

The product can be bought individually or by the dozen through:

1.) By direct order

a. Product will be packaged in boxes

b. A minimum order of at least 1 dozen

c. Delivery within 1 hour

d. Available only to the immediate vicinity of Ateneo de Manila University

2.) Healthy donut Kiosks/Stall

a. Packaged individually, in handy wrapping or

b. In boxes of threes and half dozens

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Processes

1. Mixing of ingredients

2. Shaping

3. Baking

4. Cooling

5. Flavoring

6. Serving/Packaging

Quality control will be done from the purchasing of raw materials up to production and

distribution up to the sale of the product. In purchasing raw materials, quality would be achieved

through:

Purchase of fresh ingredients

Purchase the same product brand

Stored appropriately whether in a cool dry place or refrigerated if needed

Ingredients purchased must be used before best before date

During operations and production the following must be observed to ensure quality control:

Sanitize work area and workers before and after every use

Also oven, cooking utensils and equipments should be sanitized

Must always follow exactly the recipe, cooking process and quantity needed of the

product to be produced

Store excess, unused supply appropriately as to avoid spoilage and unnecessary waste

And finally, during distribution, the finished product should be stored in a sterilized container.

B. SUPPLIER AND DISTRIBUTION NETWORK

Suppliers

Since the company is a startup operating in a smaller scale, we would be purchasing supplies

at quantities we estimate as ample for our current operation to avoid overstocking. Therefore, it

is unlikely that we will be sourcing our supplies from wholesalers because those types of

suppliers would require a larger minimum order amount. To save time cost of transportation, we

would source our supplies from an establishment specializing in selling baking supplies while

offering discounts on bulk orders. The location should also be near our area of operations.

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Thus, we have chosen to source most of our supplies from “The Cocoa Pantry” and the other

supplies in Shoppersville and Furatos. Both establishments are located along Katipunan Avenue.

Here are most of the prices of the supplies:

Ingredients/Supplies Size Price SupplierDoughnutWhole Wheat Flour 1kg P82.00 FuratosBaking Soda 250g 15 FuratosEggs 1 dozen 54 FuratosSalt 1000g 10 FuratosCinnamon 800g 100 FuratosCanola Oil 1000 L 100 FuratosVanilla Extract 20ml 21 FuratosFruits ShoppersvilleSmall Boxes 10pcs/set 85 The Cocoa PantryLarge Boxes 20pcs/set 480 The Cocoa PantryTsokolate specific ingredientsUnsweetened Chocolate 500g 110 The Cocoa PantryEvaporated Milk 1 can 32.5 ShoppersvilleStyrofoam cups Shoppersville

Distribution

Since the company is still a startup business, we will concentrate on a smaller area as our first

market. The company will distribute our products by selling through kiosks inside the Ateneo de

Manila University campus. We will also participate in different bazaar events inside the campus

such as the SOM Week and other such events.

Aside from selling inside the campus, the members of the company will also use our network

of friends to look for potential customers. A networking website such us Multiply.com may also

be used to connect all our contacts to promote our products to a larger audience.

Distribution Scheme

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The two diagrams simply show the flow of materials from our suppliers to our customers.

The first diagram represents the flow of materials for the doughnuts while the second diagram is

for the tsokolate.

The first diagram shows that the baking ingredients and packaging for the doughnuts will be

bought from our suppliers first. We will then transfer them to a bakeshop of Patti Malabanan, a

member of the group, to bake the actual doughnuts. We will be paying their bakeshop as we

make use of their equipment and their personnel. We will then transport the finished products to

our kiosk or bazaars wherein our customers may purchase them.

The second diagram shows that the supplies for the tsokolate drink will be bought from our

suppliers and then be transported directly to our kiosk/bazaar. The reason for this is that the

beverage will be made in the kiosk itself, as tsokolate is usually served hot right after being

brewed.

D. Market Testing

The company conducted an initial survey with the objective of testing out the Big O

product. The main concern of the survey was the acceptability of the taste and the look of our

donuts, especially the Whole Wheat – Fruit Jam filled variant. The survey was conducted on 40

people, age ranges from 18-24 years.

Free samples of our prototype, Whole wheat Healthy Donuts, were given out to these

people and were asked to rank the overall appeal of the product (range of 1-10, 1-4 being the

46

Nu

mbe

r of

vot

esleast appeal and therefore unsatisfactory, 4-8 as satisfactory and 9-10 rating as excellent

therefore providing highest appeal) in comparison with other doughnut brands. They were asked

to rate the product “Unsatisfactory” if the product is generally unappealing and is definitely

inferior to other doughnuts available in the market. A grade of “Satisfactory” means that the

doughnuts are at par with most of the existing brands of doughnuts and “Excellent” if the taste

and overall appeal is superb and is greater than the products served by existing doughnut brands.

The results show (refer to Appendix for a more detailed view of the results):

The data shows that the majority of the people surveyed rated our product at the

Excellent level, at 23 votes, meaning that they think the taste is excellent as well as the

presentation and also more importantly, they think that our doughnuts are better than existing

brands. It is also to be noted that nobody thought that our products were inferior to existing

doughnuts already in the market, as no one voted for a score of 4 and below. This means that,

according to the survey, they thought that at the very least, our doughnuts are a tough competitor

in terms of taste and appeal to existing doughnut shops. Further market testing will be conducted

before final operations and production.

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Rating Given

E. Personnel Required

The company has decided, for the purposes of production and operations, to not yet hire

employees at least for the first few months of operations. Because of capital constraints, doing so

will be able to reduce costs and also more importantly to have a first-hand experience on and to

be able to gather data and analyze on the major operations of the start-up business so further

improvements can be made and mistakes be spotted and corrected. For the first few months of

operation division of labor will be conducted as follows

Purchasing and Distribution departments: Byron Montiel, Francis Apolinar

Budgeting and purchasing of raw materials

Distribution to kiosk(s)

Delivery to customers

Production department: Laurence Miranda, Ryan Zamora, Patricia Malabanan

Main production of Healthy Donuts

Maintenance of cooking area/kitchen

Storage of supplies

Quality Control

Marketing department: Lorenzo Nanagas, Scott Si, Justin Gabitan

In charge of marketing and promotions

Inviting potential customers

Design of advertising materials/fliers and implementation

Sales department: Jose Angelo Castro, Stephanie Tornilla, Kathrina Koa

Actual selling

Kiosk and cashier duties

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F.&G. Location and Layout

The area where the business will primarily operate for now is inside the Ateneo campus.

Possible location for the kiosk is the allotted area near the Colayco Pavillion. The baking

operations, however, will be in conducted in various kitchen’s belonging to the incorporators.

Kiosk/Bazaar Layout

1. Counter

2. Display area for the doughnuts

3. Area for making the tsokolate drink

4. Area for the inventory of doughnuts for the day

5. Area for the customers

Can have some seats and tables where some customers may hang out

H. Inventory Management

The company will depend on the projected demand of our products in making decisions on

the amount of stocks that we will keep and the amount of doughnuts we will be manufacturing.

49

Since we will be employing the services of a bakeshop in making our doughnuts, the personnel

of the bakeshop will be handling the management of the baking supplies while the group will

handle the purchasing of the necessary amount of supplies that will be suggested by the

bakeshop.

We will need to have accurate demand projections because our products are perishable and

best served when fresh. The entire inventory levels will also depend on these demand

projections.

I. Maintenance

Supplies will be sealed with air-tight containers and stored in a cool dry place or

refrigerated when needed.

The baking/preparing area will be thoroughly sanitized before production begins

Oven, baking pans and other cooking utensils used will be cleaned regularly and after

every use.

The kiosks used for selling will be maintained by sanitizing/cleaningup the area before

opening and also upon closing everyday. Also materials used will likewise be cleaned

and stored properly afterwards.

J. Scheduling and Costs

Healthy Donut (original) Preparation for a single production equivalent to 6 servings:Steps Time (in

minutes)Measure out the following ingredients: 1 cup plus 5 tablespoons pastry flour, ¾ teaspoon baking soda, ½ teaspoon cinnamon, 1/8 teaspoon salt, ½ cup isomalt, ½ cup low fat milk, 1 large egg. 1 ½ teaspoons canola oil, 1 teaspoon vanilla extract

10

Lightly whisk the flour, baking soda, cinnamon and salt in a bowl

2

50

Mix the isomalt, milk, egg, canola oil and vanilla in a bowl until fluffy

5

Form a well in the dry ingridients and slowly pour the froth in. Mix until just combined.

5

Use a pastry bag to pipe the mixture into well coated doughnut pans

3

Bake in oven preheated to 425 degrees 10Cool on baking racks 10Apply glaze 2Let glaze harden 8Inspection and packing 10Total Time 65minutesActual time (less baking and cooling) 50 minutesTotal Calories per serving (1 doughnut) 156

Healthy Donut (whole wheat) Preparation of a single production equivalent to 6 servings:Steps Time (in

minutes)Measure out the following ingredients: 1 cup plus 2 tablespoons whole-wheat pastry flour, ¾ teaspoon baking soda, ½ teaspoon cinnamon, 1/8 teaspoon salt, ½ cup isomalt, 1/3 cup plus 1 table spoon low fat milk, 1 large egg. 1 ½ teaspoons canola oil, 1 teaspoon vanilla extract

10

Lightly whisk the flour, baking soda, cinnamon and salt in a bowl

2

Mix the isomalt, milk, egg, canola oil and vanilla in a bowl until fluffy

5

Form a well in the dry ingridients and slowly pour the froth in. Mix until just combined.

10

Use a pastry bag to pipe the mixture into well coated doughnut pans

3

Bake in oven preheated to 425 degrees 10Cool on baking racks 5Apply glaze 2Let glaze harden 8Inspection and packing 10Total Time 65 minutesActual processing time (less baking and cooling) 50 minutesTotal Calories per serving (1 doughnut) 139 calories

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Sugar-free chocolate glaze preparation of a single production equivalent to servingsSteps Time (in

minutes)1 tablespoon cocoa powder, 1 teaspoon isomalt, 1 tablespoon hot water

2

Dissolve the isomalt in the hot water 1Slowly add sweetened hot water to the cocoa powder 2Total time 5Total Calories per serving (2 tablespoons) 10 calories

Fruit Yogurt filling Steps Time (in

minutes)Measure out the following ingredients: 8 cups low fat milk, ¼ cup powdered milk, ½ cup starter culture, 1 ½ tablespoon diced fruit (strawberry, mango, pineapple) or 1 teaspoon vanilla extract

5

Pour milk into a pot, add milk powder and stir well 1Heat milk mixture to 180 degrees stirring occasionally (preheat oven to 110 degrees)

25

Let the mixture cool to 110 degrees then mix in the starter culture

10

Pour milk mixture into sterilized glass containers 5Set containers on cookie sheets in the oven (only oven light on)

3

Incubate yogurt at constant temperature of 110 degrees 360 Refrigerate yogurt for storage 120Total time 529 minutesActual processing time (minus incubation and refrigeration)

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Total Calories per serving (2 tablespoons) 15

The 11 members of the group will be divided into functional production teams. As the

recipes are fairly simple the group will break into four pairs and a group of three. Three of

the functional groups will be dedicated to doughnut production while the other two will be

assigned to dips (yogurt filling and chocolate dip) and tsokolate respectively. Fifty minutes of

simultaneous production will result in enough batter for approximately 54 donuts. Due to the

stipulations of the kitchen rent contract, production is limited to a maximum of 8 hours daily 52

with 6 hours of oven time. A one day cycle of production will result in 216 doughnuts With a

fixed biweekly schedule the group can produce up to 432 doughnuts a week. In the hectic

bazaar filled month of December, production will extend to Sundays and reach a maximum

capacity of 648 doughnuts per week.

Other factors to consider:Activity DurationBusiness registration and similar filings 2 daysProduct sampling 3 daysScouting of possible selling points 2 weeksDeliberation of a selling area and finalizing contracts 2 dayProcurement of materials from suppliers 1 dayProduction and preparation 1 weekProduct selling 1 weekFinancial status and evaluations 1 day

New Cost Structures

Healthy Donut (original) Ingredients Quantity PricePastry Flour (regular) 1 Cup and 5

Tbsp.PhP 5.985

Baking soda ¾ tsp. 0.46Cinnamon ½ tsp. 0.30Salt 1/8 tsp. 0.01Isomalt ½ Cup 3.6Low fat milk 2/3 Cup 15.38Egg 1 Piece 4.5Canola oil 1 ½ tsp. 0.15Vanilla extract 1 tsp. 5.80Total Ingredients (Makes 6 Servings) PhP 35.925Total Ingredients Per Piece PhP 5.99

Healthy Donut (whole wheat) Ingredients Quantity PricePastry Flour (wheat) 1 Cup and 2

Tbsp.PhP 9.43

Baking soda ¾ tsp. 0.46Cinnamon ½ tsp. 0.30Salt 1/8 tsp. 0.01Isomalt ½ Cup 3.6Low fat milk 1/2 Cup 15.38

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Egg 1 Piece 4.5Canola oil 1 ½ tsp. 0.15Vanilla extract 1 tsp. 5.80Total Ingredients (Makes 6 Servings) PhP 39.63Total Ingredients Per Piece Php 6.60

Yogurt Filling Ingredients Quantity PriceLow Fat Milk 8 cups PhP 246.00Powdered milk ¼ Cup 8.06 Starter culture ½ cup 10.00 Fruit bits (vanilla extract) 1 ½ tbsp. (1

tsp.) 6.00

Total Ingredients (Makes 85 Servings) PhP 270.06Total Ingredients per piece PhP 3.16

Sugar-free chocolate glazeIngredients Quantity Price Cocoa powder 1 tbsp. PhP 2.50Isomalt 1 tsp. 0.45 Water 1 tbsp. 0.01Total Ingredients (Makes 1 Servings) PhP 2.96Total Ingredients per piece PhP 2.96

Tsokolate (strawberry)Ingredients Quantity PriceWater 1 cup Php 0.25Tablea 1 tablet 3.40 Isomalt-Sugar mix 3 tbsp. 5.08 Salt 1/8 tsp. 0.01 Milk ¼ cup 7.68 Strawberry Jam 1 tbsp. 2.18Total Ingredients (Makes 1.5 servings) PhP 18.6Total Ingredients per serving PhP 2.4

Tsokolate (peanut butter)Ingredients Quantity Price

Water 1 cup Php 0.25Tablea 1 tablet 3.40 Isomalt-Sugar mix 3 tbsp. 5.08 Salt 1/8 tsp. 0.01 Milk ¼ cup 7.68 Peanut butter 1 tbsp. 1.84Total Ingredients (Makes 1.5 servings) 18.26

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Total Ingredients per serving Php 12.17

PackagingItem Quantity PricePaper Bag 1 piece PhP 1.48Label / Sticker 1 piece 1.50Total Packaging PhP 2.98

K. Development Budget

Initial working capital of PhP 5,000.00 per member PhP 55,000.00SEC filings, business registration, and similar procedures 1,000.00Market testing and product sampling 1,000.00Advertisement 1,500.00Equipment maintenance 1,000.00Transportation 1,500.00Total COGS and expenditures 6,000.00Unused capital / Remaining cash-on-hand PhP 49,000.00

To minimize unnecessary employee outsourcing the product will be made by members of the

group in batches two times a week to keep up with production requirements. Ovens used in

the production of the doughnuts, and as incubators for the yogurt filling, will be provided by

members of the group. A sufficient amount will be allocated to costs for the electrical/gas

consumption of these. This cost will be noted as “oven rent.” This negates issues related to

the disposal of said ovens in the event of the company’s dissolution. No rent will be required

for use of the production space.

1st Product Selling (November)Working capital P49,000.00Purchases(ingredients, initial supplies) 32,500Rent Deposit 6,500Oven Rental 3,000Stall 10,000Stall space/ Bazaar Rental 13,500Other Expenses 41,400Total COGS and expenditures 119,200Remaining cash-on-hand (70,200)

55

Expected revenue from sales 100,000.00New cash-on-hand P28,300

2nd Product Selling (December)Working capital P28,300Purchases(ingredients, production) 48,960Oven Rental 3,000Stall space/ Bazaar Rental 13,500Other Expenses 30,900Unused capital / Remaining cash-on-hand (67,060)Expected revenue from sales 120,000New cash-on-hand P51,940

3rd Product Selling (January)Working capital P51,940Purchases(ingredients, production) 53,856Oven Rental 3,000Stall space/ Bazaar Rental 13,500Other Expenses 30,900Unused capital / Remaining cash-on-hand (49,316)Expected revenue from sales 132,000New cash-on-hand P82,684

The number of servings given in the tables indicates the quota of sales. Profits may be increased

through efforts towards alternative selling methods such as personal sales and concessions. The

cost of booth rental or space for the product stand may vary depending on the bazaar in which

the group will participate. Under certain circumstances it is possible for rent to be negotiated on

a percent of sales basis.

L. Risk Assessment

Scenario Effect Defensive ReactionaryMajor competitors produce healthy

doughnut variants and market them aggressively.

Competitors with a larger market share an

a stronger following encroach on the niche

we have created

The Big O will position its product as a home-made special treat with careful handling which results into a quality product unlike mass

market’s mass produced frozen

custard.

The Big O will highlight itself as the first

entirely health oriented doughnuts

Healthy Doughnuts fail to capture a strong

following in the local

Consumers do not buy the new product which

results into low sales for

The Big O will endeavor to make it’s product

more delicious and find

Revisions and adjustments will be

made to the marketing

56

market. the company. ways to offer more mainstream flavors

plan and strategy of Healthy Doughnuts if

not a complete overhaul.

Inflation in the economy occurs in the

country.

Prices of healthy doughnuts will rise

hence less people may buy Frozen Innovations’ products which results

into low profit.

The Big O will invest more in product

promotion to boost volume of sales.

The Big O will adjust to the economic forces and increase their prices accordingly.

Prices of healthy doughnut ingredients

increase.

Costs to produce healthy doughnuts

increases

If the price increases for only one or two

ingredients, The Big O will search for alternate suppliers who can offer the ingredients at lower costs while maintaining

product quality. However, if all of the

prices of raw materials increase, Healthy

doughnuts will cut costs by raising operating

efficiency and limiting flavor offerings to those

in high demand.

The Big O will increase the price of its product as well as the prices of their seasonal products

depending on the season and respective

ingredient’s price.

Management and Financial Plans

Organizational Structure

Golden Halo Inc. will have three major departments under the Executive director:

Operations, Finance and Marketing. These three departments will be further subdivided and each

department and sub committee will have a respective manager to supervise, oversee and monitor

the performance of their specific function. The departments and subcommittees are enumerated

below.

Executive Director

o Chief Operations Officer

Director of Product Development

Directors of Supply Chain & Production Management

Director of Administrative Systems

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Director of Partner Management

o Chief Financial Officer

o Chief Marketing Officer

Director of External Relations

Director of Branding

Director of Sales

Job Descriptions and Requirements

1. Executive Director – Scott Si

a. The Executive Director is in charge of all business functions and the corporate

direction which they follow.

b. As the Director, he must take the initiative to set short-term corporate goals yearly

in accordance to the company’s mission and vision and its long-term objectives.

c. He must also seek out other ways to improve the organization, through value-

adding partnerships and oversight of the company from the bottom-up

2. Chief Operations Officer – Kathrina Koa

a. The COO is in charge of all business operations, from the supply chain to sales, to

HR management and product research and development.

b. She is expected to work together with the Executive Director and the other two

Chief Officers in order to continuously improve operations while keeping it in

line with branding standards and the company’s mission and vision.

3. Chief Financial Officer – Anjo Castro

a. The CFO is in charge of all accounting functions, and basically must oversee the

creation of pertinent documents to be submitted to the SEC and BIR (for tax

58

purposes) as well as those to be used for internal accounting, including the

balance sheet, income statement, and the like. He must ensure that the accounting

principles used in the accounting of business activities fall under IFRS or GAAP.

b. He must approve the accountants hired for his department as endorsed by the

Director of Accounting

c. He must work with all other departments to determine the revenue and costs

incurred in each department, including his own.

4. Chief Marketing Officer – Stephanie Tornilla

The CMO is in charge of External Relations and Branding. She works with almost

all other departments in overseeing the partnerships and promotion/advertising

activities entered in by the company, assisted by both directors under her.

5. Director of Product Development - Byron Montiel

The Director for PD leads his department in the innovation of the product and its

development. He seeks new ways to improve operation and sales, with heavy

emphasis on improving the products the company offers to its potential

customers. He also works with the CFO to promulgate the expenses incurred in

his department.

6. Director of Supply Chain Management – Justin Gabitan

Director of Supply Chain MGT is in charge of the production process of the

company’s products. He also is the company’s face during

discussions/negotiations with the company’s [potential] suppliers, as well as

distributors, if any. He works with the CFO for production costs, storage costs,

etc.

59

7. Director of Partner Management – Francis Apolinar

The Director of Partner Management handles the company’s employees and any

complaints, as well as their suggestions.

8. Director of Administrative Systems – Ryan Zamora

The Director of Administrative Systems takes care of internal management. He

ensures that the supply chain, inter-department communications, and other such

details are streamlined and taken care of. He takes care of most of the country’s

administrative work.

9. Director of External Relations – Patti Malabanan

The Director of ER handles proposals from organizations for events and the like.

She also seeks opportunities for the company to increase brand exposure. Being in

charge of ER, she also manages the promotions and marketing strategies of the

company, working directly with the CMO and Executive Director.

10. Director of Branding – Enzo Nanagas

The Director of Branding has deep-seated knowledge on company’s brand image,

its mission, vision, and differentiator, and ensures that every single facet of the

company obeys branding standards.

11. Director of Sales – Lawrence Miranda

The Director of Sales is in charge of managing the company’s distribution

channels and its stalls. His job is to maximize sales and make sure that the sales

process fits the company’s branding standards, and ultimately, to report his sales

figures and forecasts to the CFO.

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Financial Plan and Projections

Golden Halo, Inc.

Monthly Income Statement

ATENEO November December January

Revenues      

  Doughnut sales 100000 120000 132000

Variable expenses      

  Production costs 40800 48960 53856

Contribution margin 59200 71040 78144EXTRAORDINARY SALES      

Revenues      

  School fairs 25000 30000 25000

Variable expenses      

  Production costs 10200 12240 10200

  Variable rent 3000 3600 3000

Contribution margin 11800 14160 11800

Other expenses      

  Stall rent 10500 10500 10500

  Marketing expenses 8400 8400 8400

  Packaging expenses 15000 15000 15000

  Doughnut flavoring 7500 7500 7500

Pre-tax income 29600 43800 48544

         

Pre-tax Income/Sales 0.296 0.365 0.367758

Golden Halo, Inc.    Balance Sheet    

1-Nov-09    Assets    Cash 12750  Rent Deposit 10500  Initial Inventory 15000  Oven Rent Deposit 3000  Stall 10000  Total Assets 51250  Equity    

Golden Halo, Inc. 51250  

     

Initial Investment req 5000 Per mem

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Unit costing for revenues

Direct materials 5.7

Utilities allocation 1.5

Direct labor 0

Total 7.2

  Plain Flavored

Pricing 20 22

Gross margin 7.8 10.8

Profit margin 0.52 0.6

Sales mix 0.1 0.9

Target monthly sales 100000 120000 132000

Monthly sales 10000 90000 12000 108000 13200 118800

Monthly sales units 667 5000 800 6000 880 6600

Daily sales 500 4500 800 7200 660 5940

Daily sales units 33 250 53 400 44 330

Schedule of marketing expenses

Sample production 900

Tarpaulin printing 2000

Photo shoots 3000

Poster printing 2500

Total 8400

Schedule of rent expense

Ateneo de Manila 10500per month

School fairs 0.12 of sales

Statement of Cash Flows

November 2009 December 2009 January 2010Cash, Beginning

55,000.00 28,300 51,940

Cash Flow from Operating Activities

Cash inflow from sales

100,000 120,000 132,000

Cash out flow (44,500) (3000) (3000)

62

from set-up/fixed costsCash outflow from inventory

(40,800) (48,960) (53,856)

Cash outflow from other expenses

(41,400) (44.400) (44,400)

Net Cash from Operating Activities

(26,700) 23,640 30,744

Cash Flow from Investing ActivitiesCash outflow from equipment

- - -

Cash Flow from Financing ActivitiesCash outflow from dividends

- - -

Cash, Ending 28,300 51,940 82,684

Appendix

Porter’s Analyis on the Donut Industry

Bargaining Power of Suppliers – LOW

o Main ingredients for donuts are only commodities like flour and sweeteners.

o Hence, they are cheap and readily available.

o Threat of forward integration for suppliers is also low since they are mostly

commodity traders.

o Cost of raw materials can be driven down with larger scales of production.

63

Bargaining Power of Consumers – MEDIUM

o Consumers generally have a moderate bargaining power because they are constrained

by their cravings and budget yet they remain primary drivers of the donuts business.

o The bargaining power of consumers is driven down by the pioneering position of

healthy fruit donuts as the first healthy donuts available in the market.

Intensity of Competitive Rivalry (Competitors' Behavior) – HIGH

o The competition within the industry is fierce, especially the neck-to-neck competition

of the top two players Dunkin Donuts and Mister Donut.

o The relatively new companies thus avoid getting into this rivalry by focusing on other

target markets.

Threat of Entry – MEDIUM

o The intense rivalries and deep pockets of the donut businesses in the country make it

difficult for new entrants to flourish in the industry.

o Although the barriers to entry for donut selling on a per unit or per stall basis is low,

it can be very difficult to compete with the established companies on a wider scale.

o Still, there is an opening for products which offer innovation and good value.

Threat of Substitutes – HIGH

o Donuts can be consumed as snacks or desserts, providing a myriad of alternatives to

choose from.

o Since Filipinos love sweets, sweet products of all kinds appeal to them.

o Donuts are easily substituted with other kinds of pastries.

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o Donuts usually serve as the middle ground between the cheaper pastry breads and the

high-end cakes. This position enables it to survive but makes it difficult to thrive.

Breakdown of market responses from FGD

Rating Number of responses

Total

Unsatisfactory 1 None2 None3 None4 None 0

Satisfactory 5 None6 27 38 12 17

Excellent 9 1410 9 23

Consumer Profile

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Gender40% men 60% women

Age18-22 (college) 23-35 (working)60% 40%

Income per monthP1000-2500 P2500-5000 P5000 and

above10% 40% 50%

OccupationStudent Working60% 40%

PEST Analysis

Political Economical Social Technologicalo Decreased income

taxes (to 30%)o Compliance with

industry standards as held by Bureau of Foods and Drugs.

o Adherence to other applicable laws (fat content – ice cream must have 5-16% fat content while yogurt must contain at least 4%)

o Stricter regulation of produced wastes resulting from production (depending on the city)

o According to Business Mirror, people are being more prudent in spending due to the crisis late last 2008, though demand usually picks up during holiday season.

o OFW remittance expected to fall from 2008 values this year, decreasing amount of money available for people to spend.

o Low inflation will benefit the company.

o Consumer income can be spent on substitutes due to their more favorable perception.

o Private consumption growth expected to drop from 4.6% to 2.2%

o With a poverty incidence of more than 30% as reported in the Asian Development Bank’s report, the social class system in the country is concentrated in the extremes.

o The masses heavily favor cheap products (along with family bonding and celebration) while the middle to high class consumers prefer healthy and sophisticated types of donuts.

o Doughnuts are considered unhealthy by nature and many people find it hard to believe that healthy doughnuts can actually exist.

o Innovations such as no-fry, oven-baked doughnuts and perfect sugar substitutes that can withstand oven heat allow the company to produce its doughnuts.

o Technology has made it easier to promote products

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SWOT Analysis for Golden Halo, Inc.

Strength Weakness Opportunity ThreatFirst-mover advantage in healthy donutsConnections with bakeshopInnovative productsAffordable pricesAttractive proposition

Limited fundsLacking in contactsInsufficient time to try out new flavorsIngredients are not at their lowest pricing yetSuppliers does not prioritize company ordersLimited market size

Trend: healthy lifestyleConsumer behavior: snackingBazaars and exhibits, trade fairs, and food expo

Strong brand loyalty to companies such as Dunkin’ Donuts, Krispy Kreme, Go Nuts Donuts, etc.Long established tie-ups of competitors with formidable and well-known companies/brandsLower purchasing power of consumers

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Competitor SWOT

Company Strengths Weaknesses StrategiesDunkin donuts 1. High loyalty from

customers2. Quality of premium, variety products3. Integration of company to consumer lifestyle

1. Long perfected process for products2. Strict ingredient specifications

The company banks on strengths with focus on improving coffee products. Continuous effort to adhere to the likes of the consumers.

Mister Donut 1. Multiple franchise opportunity2. Management and start-up assistance

1. High franchise standards2. High staff credential requirement

Wins the customers through ads that reminds the customers of their past as well as with a well-managed image

Go Nuts Donuts 1. Entertainment donuts2. Good market research3. Persistence to cross over obstacles

1. Time-consuming market trials2. Craft takes time3. Market is “saturated”

Produced a niche marketing based solely on making the work more fun and by finding the missing piece from the market

Krispy Kreme 1. Understanding of the hardship of its employees2. Optimistic for business opportunities

1. Non-flexible management2. Poor visionary of outcome

The strength of the company lies in the capacity to focus on what Krispy Kremes means instead of grasping on trends which goes against what it is

Hot Loops 1. Cheaper costs for raw materials2. Convenient branch opportunities

1. Low packaging of freshness2. Low class image

Banking under the Robina Corp., it makes uses of the cheap raw materials to play around with the tastes of its customers

Happy Haus 1. Attractive 1. Poor flavouring Making use of its

68

franchising schemes2 High market awareness3. Low pricing

of doughnuts.2. Poor consistency of management and franchise3. Inefficient delivery system of supplies to their franchisees

high market awareness along with its cheaper doughnuts, it entices the curiosity of its consumers to try to consume their doughnut

SURVEY QUESTIONNAIREGood day! We’re Management students from the Ateneo de Manila University conducting a survey for a possible business venture. Please take your time in answering our survey.

I. Respondent Information

Age: ___

Gender: [ ] Male [ ] Female

Working Status:[ ] Student [ ] Professional

Monthly Allowance/Salary:[ ] less than P5,000[ ] P5,000 – P9,999[ ] P10,000 – P19,999[ ] P20,000 – P29,999[ ] P30,000 and above

II. Preferences

1. Do you eat doughnuts? (if yes, go to #3)[ ] Yes [ ] No

2. Would you like to try some donuts? (if yes, go to #7; if no, have a nice day)[ ] Yes [ ] No

3. How often do you buy doughnuts?[ ] once a week[ ] twice a week[ ] thrice a week[ ] more than thrice a week

4. How many donuts do you buy on average every purchase?[ ] 1 – 3 [ ] 10 – 12

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[ ] 4 – 6 [ ] Others: ___[ ] 7 – 9

5. Which donut establishments do you patronize? (mark all that apply)[ ] Dunkin’ Donuts[ ] Mister Donut[ ] Cello’s[ ] Krispy Kreme[ ] Others: _________________

6. What do you like most about the establishments mentioned? (mark all that apply)[ ] Ambiance [ ] Brand[ ] Variety [ ] Price[ ] Healthiness

7. Would you be interested in low-calorie donuts? (if no, have a nice day)[ ] Yes [ ] No

8. Which glaze/flavor/variety would you try? (mark all that apply)[ ] Chocolate [ ] Candy Sprinkles[ ] Vanilla [ ] Pinipig Sprinkles[ ] Strawberry [ ] Nut Sprinkles[ ] Others: _________________

__________________________________

9. Would you buy doughnuts from a brand called, “The Big O!”?[ ] Yes[ ] No, then please choose from which you prefer from these alternatives:

[ ] Whoa! Donuts[ ] Halo Donuts[ ] Wicked Donuts

10. Which of these logos appeals to you the most? (encircle your preference)

11. Which of these taglines sounds best?[ ] The donut that makes you go oh![ ] The donut that makes you go![ ] You never forget your first time

12. Which doughnut package do you prefer?[ ] Box of 3 [ ] Box of 6

13. How much would you be willing to spend for a box of 3 low-calorie donuts?[ ] P30 – P59 [ ] P90 – P119

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[ ] P60 – P89 [ ] P120 and above

14. How much would you be willing to spend for a box of 6 low-calorie doughnuts?[ ] P30 – P59 [ ] P90 – P119[ ] P60 – P89 [ ] P120 and above

15. Would you want a hot chocolate beverage to go with your box of doughnuts? If yes, continue. If not, then alrighty.

16. How much would you be willing to spend for a combo that has a chocolate drink and 3 doughnuts?

[ ] P50-69 [ ] P100-119[ ] P70-99 [ ] P120-139

17. How much would you be willing to spend for a combo with a chocolate drink and 6 doughnuts.

[ ] P80-119 [ ] P140-159[ ] P120-139 [ ] P160-179

Thank you for taking our survey. Have a nice day!

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