Paragon Trading (P) LTD

Business Development Plan-
Paragon Trading (P) Ltd.
Submitted By : Benzin Dahal, EMBA Spring 2010
Ace Institute of Management

Business Development Plan-Paragon Trading (P) Ltd.
Contents
Chapter 1: BUSINESS INTRODUCTION ..................................................................................... 5
Chapter 2: THE BUSINESS ENVIRONMENT ............................................................................. 9
2.1 PESTEL Analysis .................................................................................................................. 9
2.1.1 Political Environment ..................................................................................................... 9
2.1.2 Economic Environment ................................................................................................ 10
2.1.3 Social Environment ...................................................................................................... 10
2.1.4 Technological Environment ......................................................................................... 11
2.1.5 Environmental Analysis ............................................................................................... 11
2.1.6 Legal Environment ....................................................................................................... 12
2.2 Michael Porters Five Forces Model ................................................................................... 13
2.2.1 Threat of New Entrant .................................................................................................. 13
2.2.2 Bargaining Power of Customer .................................................................................... 13
2.2.3 Bargaining Power of Supplier ...................................................................................... 13
2.2.4 Threat of Substitute Products ....................................................................................... 13
2.2.5 Rivalry among Competitors.......................................................................................... 14
Chapter 3: DESCRIPTION OF SPARE PARTS .......................................................................... 15
3.1 Filters and Genuine Oil ....................................................................................................... 15
3.2 Ground Engaging Tools (GET) and Undercarriage ............................................................ 16
3.3 Electrical Components ........................................................................................................ 17
3.4 Miscellaneous Items ............................................................................................................ 17
Chapter 4: MARKET RESEARCH AND ANALYSIS................................................................ 18
4.1 Total Spare Parts Market Size ............................................................................................. 18
4.2 Competitor Analysis ............................................................................................................ 20
Chapter 5: OPERATIONS PLAN ................................................................................................ 24
5.1 Spare Parts Supply Process ................................................................................................. 24
5.1.1 Warehouse Processes .................................................................................................... 24
5.1.2 Procurement Processes ................................................................................................. 27
5.2 Quality Management ........................................................................................................... 30
5.3 Location ............................................................................................................................... 31
5.3.1 Head office ................................................................................................................... 31
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5.3.2 Warehouse .................................................................................................................... 31

5.4 Layout Design ..................................................................................................................... 32
5.4.1 Head Office Layout ...................................................................................................... 32
5.4.2 Warehouse layout ......................................................................................................... 33
5.5 Supply-chain Management .................................................................................................. 33
5.6 Inventory Management ....................................................................................................... 35
Chapter 6: MARKETING STRATEGIES AND PLAN ............................................................... 37
6.1 Current Market .................................................................................................................... 37
6.2 Market Segments ................................................................................................................. 37
6.3 Target Market (Market Strategy) ........................................................................................ 38
6.4 Growth Strategy .................................................................................................................. 38
6.4.1 Market Penetration strategy .......................................................................................... 38
6.4.2 Market Development Strategy ...................................................................................... 39
6.5 Positioning of the Company ................................................................................................ 39
6.6 Marketing Mix..................................................................................................................... 39
6.6.1 Product .......................................................................................................................... 40
6.6.2 Pricing ........................................................................................................................... 40
6.6.3 Place.............................................................................................................................. 41
6.6.4 Promotion ..................................................................................................................... 41
6.6.5 People ........................................................................................................................... 42
6.7 Marketing Budget ................................................................................................................ 42
Chapter 7: ORGANIZATION AND HUMAN RESOURCE MANAGEMENT ......................... 43
7.1 Legal Incorporation of the Business.................................................................................... 43
7.2 Ownership Information ....................................................................................................... 43
7.3 HR Planning and Function .................................................................................................. 43
7.3.1 Organization Structure .................................................................................................. 43
7.3.2 Human Resource Policy ............................................................................................... 44
Chapter 8: FINANCIAL ANALYSIS .......................................................................................... 47
8.1 Methodology of Financial Analysis .................................................................................... 47
8.2 Key Assumptions for Financial Analysis ............................................................................ 47
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8.3 Investment in Fixed Assets ................................................................................................. 48

8.4 Sales Revenue ..................................................................................................................... 48
8.6 Total Profit (Loss) ............................................................................................................... 49
8.7 Key Financial Ratios...49
Chapter 9: CRITICAL RISK AND CONTINGENCIES.............................................................. 50
9.1 Market Risks ....................................................................................................................... 50
9.2 Operational Risk .................................................................................................................. 50
9.3 Human Resource Risk ......................................................................................................... 50
Chapter 10: SUMMARY AND CONCLUSIONS ....................................................................... 51
ANNEXES .................................................................................................................................... 52
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Chapter 1: BUSINESS INTRODUCTION
1.1 Background and Business Concept
Nepal is considered as a country with geographical variations. It has been seen that there is a
need of reconstruction in different parts of the country. Some of the places have no roads and the
infrastructure is yet to be developed in those areas. The country still comes under the list of
underdeveloped nations because of various other reasons including its poor infrastructure in
terms of facilities for transportation from one place to another.
Nepal is also seen to be growing in hydropower sector. There are many hydropower plants which
are in construction phase and some of the big hydropower projects are yet to be started. These
hydropower projects have huge capacity varying from 1 MW to 500 MW.
Another important sector in developmental activities is Irrigation and Land plotting. There are
projects which have started to work upon creating canals and establishing gates to control the
flow of water.
In the last years, it was seen that the real state sector was at a booming phase. Various lands were
plotted and sold in a large amount.
All of the activities mentioned required (or requires) different kinds of heavy equipments for
their specific purpose. A hydropower sector requires an Excavator and a Backhoe loaders and a
road construction sector requires Dozers, Rollers and Graders. Similarly an irrigation project and
a land plotting projects require an Excavator and Dozers.
With the increment in requirement of Heavy Equipments in the last few years, it is obvious that
there have been requirements of spare parts that are used during maintenance of the machines.
The spare parts requirements vary from the very initial phase of machine operation to the scrap
period of the machine.
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In order to tap the potential of the spare parts requirement for Heavy Equipments, Paragon
Trading (P) Ltd. is planned to establish by one professional who has a rich experience in the
spare parts business. The company plans to import parts from different parts of Asia and sell
these quality parts the machine owners.
The overall ambition of this concept is to supply the equipment owners with quality parts which
have a durable life. The company plans to increase its parts distribution gradually in different
parts of the country in a period of five years. The company wishes to provide the customers with
a product which gives them a value for their money.
1.2 Scope of Business Activities
Paragon Trading (P) Ltd. will import Original Equipment Manufacturer (OEM) parts from
different countries of Asia. All the parts sold by the company will have a standard that will
maintain the quality similar to the parts that are fitted originally on the machine.
The company will sell the parts on a retail basis on the first year of establishment. The parts
will basically be targeted to people having fleet of machines. On the second year, the company
will increase its inventory in order to address the bigger market. From the third year, the
company will expand its branches in different parts of the country namely Hetauda, Butwal and
Itahari considering the machine population in these areas.
1.3 Nature of Business
Paragon Trading (P) Ltd. is planned to be registered under the Company Act of the Nepalese
Government. The company will have a sole proprietor with total investment from his side. The
company will have a working capital of Nepalese Rupees 10,000,000 (approx).
The company will have a trading business following import of spare parts and selling it to the
end user. The company will store a certain amount of spare parts in its warehouse by identifying
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the parts that are regularly in demand. The warehouse will be located at Balkhu and the office
will be situated in Teku. Also, the company will import the spare parts through air mode of
shipment when the requirement of spare parts is on urgent basis.
1.4 Vision of the Company
The vision of the company is:
To be the largest one-stop centre for heavy machinery parts, making it possible for the
developmental activities to run smoothly in the country
1.5 Mission of the Company
The mission of the Company is:
To provide the customers the best quality parts at the shortest possible time by continuously
monitoring the current demands of heavy equipment spare parts.
1.6 Goals and Objectives of the Company
The main goals and objectives of the company are:
a. To provide the best quality parts within 1 week of orders received.

To maintain a strong procurement channel with OEM suppliers.
To maintain an inventory up to a stipulated level.
To maintain the quality of spare parts through continuous monitoring and assessment
of suppliers.
b. To be the leading heavy equipment parts supplier within 5 years period.

To maintain a good relationship with customers and workshop owners and
technicians.
To establish branches in various parts of the country.
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c. To reach self sustaining profitability within the next five years.

To increase the parts sales by 20-25% yearly.
To generate a turnover on NPR 10 million in Year 1 and increase it to NPR 40
million in Year 5 of the establishment of company.
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Chapter 2: THE BUSINESS ENVIRONMENT
2.1 PESTEL Analysis
The following PESTEL Analysis has been carried out on external environment that may
influence the company.
2.1.1 Political Environment
Nepal has undergone various ups and downs with different Government formations in the past 4
years. There have been cases seen when the policies made by the old Government has been
changed by the new Government. After the fall of the king, there was a positive vibe in the
industries with the feeling of New Constitution formation. The business industries also had a
positive feeling that the Government would implement some policies that would support the
sector. Nonetheless, it all proved wrong when the political parties are themselves intermingled
with the Cat Fight for the formation of the Government led by their own parties.
The equipment industry has also faced turmoil in the past years. During 2009, the equipment
industry boomed because of the support by the Government. Later, due to the late budget release
by the Government, the equipment industry had to face problems as the equipment owners could
not get their payments on time.
This has also affected the spare parts industry as most of the times machines have been seeing
idle as the equipment owners are not able to maintain their machines as they do not have
sufficient amount due to late payments. Also, the ongoing strikes also affects this market a lot as
the machine have to remain idle and the equipment owners do not have any idea how to recover
their investment.
Another big problem for the equipment owners are the ransom they are asked for using their
equipment in the site. A huge amount of money is spent as ransom for the threat that their
equipment might be damaged by the people who have asked for the huge chunk of money.
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This eventually affects the spare parts industry as machine owners are not willing to invest
money on good quality parts as a big amount of money is already lost somewhere else. There is a
scope of spare parts industry but the market has been dominated by bad political environment
until now.
2.1.2 Economic Environment
The economic environment of Nepal is partially supportive towards the spare parts industry. The
banks are willing to invest in the spare parts industry considering the returns and profits. The
liquidity crunch have somewhat affected the market but not as hard as other sectors like machine
sales, machine rental etc.
The heavy equipment spare parts industry is affected indirectly by the economic environment in
the country. There are almost 2200 equipments currently and the machine rental has to face a big
competition. Thus the rental amount varies from NPR 1500 to NPR 2000 per hour. The
equipment owners have to face a big competition and some of the machines may have to be idle
as they are not able to stand the competition. Thus the market demand of spare parts decreases
considering the large numbers of equipments remaining idle at a period.
As the spare parts industry largely depends on imports from other countries, the business is
affected by the export policy of the supplying country, the taxation policy in our country and the
change in the dollar rate versus Nepalese Rupee. Recently, the government had changed the
import tax in spare parts from 5% to 15% from July, 2011.
2.1.3 Social Environment
Due to better job opportunities abroad, more and more people are opting for foreign
employment. The manpower drain of the country is at high rate. As per the official figure 50
people per day are leaving country to find jobs abroad. In reality the figure is much higher. So,
companies are finding it difficult to find skilled manpower.
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The spare parts industry also needs some manpower that has understanding of spare parts. On the
contrary, the demand for this kind of manpower is now increasing in countries like South Korea,
Australia, Malaysia and Dubai.
Thus the spare parts shop owners have the only option to either find a person in a higher pay
scale or train a person to be capable to have knowledge of spare parts.
2.1.4 Technological Environment
The spare parts industry is largely dependent on the technological environment of the parts
supplying country. The spare parts industry also sees a rapid change in technological
advancement with the changes in the mechanism of the equipments.
A spare parts personnel has to understand the technology used in that particular spare part and
should be able to justify it to the spare parts purchaser. So, to understand the technological
environment is a must in this industry.
2.1.5 Environmental Analysis
The spare parts industry is highly located in Kathmandu as it is the capital city and is the major
commercial hub for any business. Most of the big spare parts shops are specifically located in a
similar area (Teku, Putalisadak).
Some of the parts shops have also established their branches outside the capital also. The shops
have been established considering the number of machines in that area. Even though, most of the
construction companies have their head offices at Kathmandu but the equipments at remote area,
the owners usually prefer to buy parts from the nearest point in order to avoid carrying of those
bulky spare parts.
The peak season of equipment operation is from September to April. So, the demand of spare
parts become quite high compared to the demand from May to August. During this peak period,
the equipment owners are even ready to pay a premium price for the spare parts in case it is
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found that the machine operation is going to be stopped because of the spare part in that
equipment.
2.1.6 Legal Environment
There are some of the Government legalizations that have to be fulfilled by the spare parts
business:
Company Registration
The spare parts company has to be registered under the Company Act of Nepalese
Government which will be audited in order to check if the company has imported parts under
the act.
Import Duty
There is an import duty on various spare parts i.e. 5% on Engine Assembly, Ground
Engaging Tools, Undercarriage; 15% on components; and 25% on Rubbers and Bearing
items.
Value Added Tax (VAT)
The spare parts shop has to enroll the VAT registration. The Government charges 13% VAT
in addition to the import duty on the spare parts. The spare parts shops have to issue the VAT
bill to the customers as per Government Regulation.
Permission from the Municipality
In order to open the spare parts shop, permission has to be taken from the Municipality
office. The Municipality office then issues a certificate for doing business in the proposed
area.
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2.2 Michael Porters Five Forces Model
The Porters Five Forces Model related to the spare parts industry, are listed below:
2.2.1 Threat of New Entrant
There is a big threat of new entrant in the spare parts industry of heavy equipments. The spare
parts market of equipments is still at a growing phase as the equipments purchase increased from
2009 and the heavy maintenance like engine overhaul, pump overhaul has just begun for these
machines. Thus the demands for these spare parts have started to increase with time.
The possibility of new entrant is high considering the easiness in registering the spare parts shop.
The only constraint is the amount of investment and the knowledge of this business as opening a
spare parts shop for heavy equipments demands technical abilities.
2.2.2 Bargaining Power of Customer
The bargaining power of customer is a threat in this industry. Usually, the customers bargain for
those kind of parts which are easily available in the market.
On the other hand, the customers are even ready to pay a premium price in case the parts are not
easily available.
2.2.3 Bargaining Power of Supplier
Most of the parts shop owners have a specified supplier from other countries. So, there is a less
chance of this threat. The bargaining power of supplier is prevalent in local sales (i.e. within
country) when the supplier identifies that the spare part is not available with other suppliers.
2.2.4 Threat of Substitute Products
The threat of substitute product is prevailing in the spare parts industry. The good quality parts
have a threat of similar parts but having a bad quality and are sold in a lesser price. There are
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many suppliers who sell product having the same specification but having a vast difference in
quality.
2.2.5 Rivalry among Competitors
The spare parts industry in Nepal has not faced rivalry between suppliers until this period of
time. The spare parts owner usually sells the parts to another supplier if there is a purchase
request from the competitor.
But, along a period of time the rivalry may go intense as the parts shop are in the state of
increment. This may create insecurities among each supplier considering the potential loss of
their loyal customers.
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Chapter 3: DESCRIPTION OF SPARE PARTS
The company will sell all kinds of spare parts of Construction Equipments in the market.
Following are the spare parts that will be sold by the company:
Filters and Genuine Oil

Ground Engaging Tools (GET) and Undercarriage
Electrical Components
Miscellaneous Items
3.1 Filters and Genuine Oil
Filters and Oils are the spare parts which are replaced during machine scheduled maintenance.
The scheduled maintenance period of machine varies from 250 hours to 500 hours of machine
operation. There are various types of filters which are replaced in a specified period. The details
of these filters are given below:
Oil Filter: These are replaced in every 250 hours of machine operation. This filter is
replaced during machine servicing.
Fuel Filter: These filters are also replaced in every 250 hours of machine operation. The fuel
filter is replaced during regular servicing period.
Air Filter: These filters are replaced in every 1000 hours of machine operation. Air Filters
are replaced so that the machines can intake fresh air inside the engine chamber.
Hydraulic Filter: These filters are used in machines that operate under hydraulic function.
These filters are replaced in every 1000 hours of machines operation.
Breaker Element: These kinds of filters are replaced in every 100 hours of machine
operation when the machine has installed a breaker to break different stones and rocks.
Transmission Filter: These kinds of filters are used mostly in machines like Loaders and
Dozers. These filters are replaced in every 1000 hours of operation.
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The descriptions of various types of Oils used in machines are described below:
Engine Oil: These kinds of oils are replaced in every 250 hours of machine operation. Each
machine has a specific engine oil grade. The oil grade requirement should be checked before
filling in the machine.
Hydraulic Oil: These kinds of oils are usually replaced in machines operating in hydraulic
system. These oils are replaced in every 1000 hours if breaker is used as an attachment or in
every 2000 hours if the machine is used in normal operation. The hydraulic oil also has a
specific grade and the grade should be checked in case of replacement of hydraulic oil.
Transmission Oil: These kinds of oils are replaced in every 1000 hours of machine
operation. These oils have also a specific grade.
Apart from filters and oils, there are also some more products that should be replaced during
periodic maintenance:
Coolant: These are replaced in every 2000 hours of machine operation in order to ensure that
the machine does not get over-heated.
Grease: Grease is kept in areas of machines where there is frictional movement. Grease is
added checking the machine operation time and again (usually weekly basis).
The company wishes to sell 40% of the total inventory as filters and oils. The company will buy
all the filters and oils from the machine distributor itself. The mode of order can be direct
shipment through L/C. The purpose of selling genuine filters and oils is that these are very
sensitive products that can affect machine life itself. The filters are cheaper in price compared to
remaining 3 product categories but have the biggest market of all.
The periodic replacement schedule of filters and oils are also provided in Annex-1.
3.2 Ground Engaging Tools (GET) and Undercarriage
GET and Undercarriage are the parts that are replaced in case of wear and tear in the machines.
The GET category includes Tooth and Buckets whereas the Undercarriage categories include
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Rollers, Idlers, Track Pin & Bolts, Track Link, Track Shoe, Sprocket, and Segments. These kinds
of components have a heavy market share but there is a big competition in the market.
The quality of GET and Undercarriage are differentiated by the materials they are made of and
their weights. There is a big price difference range in GET and Undercarriage parts in the
market.
The company will sell 20% of the total inventory as GET and Undercarriage. The sales will
basically include Tooth that will be imported directly from Singapore.
3.3 Electrical Components
These are the components which have electrical functions in the equipments. The list of spare
parts basically includes Sensors, Starters, and Governor Motors etc.
The market electrical components is quite less compared to filters and GET markets as the
electrical components do not have a defined life and are usually ordered only on demand basis.
The company wishes to sell 10% of the total inventory as Electrical Components. The
components will be ordered as per the demand from customers and will be ordered through air
mode of shipment.
3.4 Miscellaneous Items
These items category integrates various parts such as Engine Overhaul items, Hydraulic pump
repair items, Turbochargers, Transmission kit, Fuel pump parts etc. These items are usually
replaced after 5,000 to 10,000 hours of machine operation.
The company will sell OEM parts under this category. The parts will be sourced from different
countries like Singapore, China and Korea.
The company will sell 30% of the inventory under this category.
The pictures of these product categories are shown in Annex-2.
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Chapter 4: MARKET RESEARCH AND ANALYSIS
4.1 Total Spare Parts Market Size
The heavy equipment spare parts market is totally dependent on the number of equipments in the
market. There is no exact database of the population of each brand. A tentative population from
the Department of Transport Management in 2067-68 shows the following data:
Komatsu : 1,400 units

JCB : 500 units
L &T : 200 units
CAT : 150 units
Hyundai : 150 units
Sumitomo : 20 units
Others : 10 units
Total : 2,430 units
The cost breakdowns of all of these machines are provided below:
Cost of Servicing
Number of Machines: 2,430

Number of servicing in a year: 8
Cost of each servicing: NPR 37,500 (on an average)
Total Cost of Servicing for 2,430 machines = 2,430*8*37,500
= NPR 729,000,000
During the servicing Engine Oil, Hydraulic Oil and the filters are replaced. (Please refer Annex-
1 for Servicing Schedule).
Please refer Annex-3 for sample cost for yearly servicing.
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Engine Oil and Hydraulic Oil Market for Heavy Equipments
Consumption of Engine Oil per servicing = 26 liter

Period of Engine Oil replacement per year = 8 times
Cost of Engine oil (average) per liter = NPR 400
Total Engine Oil Market per year = 26 liter* 8* NPR 400/ liter* 2, 430 machines
= NPR 202,176,000
Consumption of Hydraulic Oil per machine = 200 liter

Period of Hydraulic Oil replacement per year= 1 time
Cost of Hydraulic oil (average) per liter = NPR 400
Total Hydraulic Oil Market per year = 200 liter* 1* NPR 400/liter* 2,430 machines
= NPR 194,400,000
Total Market of Engine Oil and Hydraulic Oil in a year = NPR 396,576,000
There are big players of Oil in the markets like Castrol, Mobil (Esso), Valvoline, Shell, and BP
in the heavy equipment market. Also, the engine oil and hydraulic oil are directly imported by
the distributors under their own brand name.
Other spare parts like GET, Undercarriage, Electrical components and miscellaneous items have
a market of approx. NPR 85,000,000 per year. The market of this sector is low as most of the
machines are low and the useful life of approx. 5,000 hours to 10,000 hours. Most of the
machines in Nepal are purchased after 2009 and these machines have just started to cross 5,000
hours of operation. So, the demand for these items will increase in a period of 2 or 3 years.
The total market of heavy equipment of spare parts and oils is NPR 814,000,000 which has been
obtained by adding the market of Filters and Oils and other spare parts like GET, Undercarriage,
Electrical components and Miscellaneous items.
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The current market of Coolant and Grease is approx. NPR 15,000,000 per year.
The spare parts market is NPR 402,424,000 excluding the engine oil, hydraulic oil, and coolant
and grease market.
The distributors of the brands like Komatsu, JCB, L & T, Hyundai, CAT, JCB, Sumitomo and
smaller brands have almost 60 percent market share in the spare parts market. This creates a
market of approx. NPR 150,000,000 for the spare parts seller in Nepalese market.
4.2 Competitor Analysis
The heavy equipment spare parts industry in Nepal already has some players. These spare parts
seller have been into operation before 2009 i.e. before the heavy equipment market boomed. The
lists of big players in the heavy equipment with their respective market share are provided
below:
Name of Competitor Current Market Share

Neupane Engineering 27%
B.S. Trading 20%
Amit Traders 7%
Chandra Traders 7%
R.S. Machinery 7%
General Trading 7%
Shivam Multipurpose 7%
Self Import (Government Projects) 20%
All of the above mentioned competitors have their own import channel. These companies import
parts from different countries like China, India, Singapore, Korea, Indonesia and Japan.
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As a part of Competitor Analysis, the strength and weakness of these spare parts suppliers are
shown below:
Name of Strength Weakness

Competitors
Experienced and have Not focused to the particular

knowledge of all the different model resulting the
Neupane
model of construction as well overstocking of parts as well as
Engineering
as automobile. machine.
Over 1000 items stock covers Poor Inventory, volume of sales

B.S. Trading almost all models of Komatsu is very low compared to their
& Caterpillar. huge stock.
Experienced and have good Very limited stock, parts

Amit Traders sourcing channel. sourcing on demand basis only.
Aggressive sales and Very limited stock, mostly from

marketing of spare parts of China only, there are no quality
Chandra Traders
Heavy equipment within less parts sold.
than 2 years of time.
Technically sound, Very limited stock (less than

experienced man power to 200 items), almost all items are
deal with customer, offer from China only, thus the
R.S. Machinery
competitive price to customer company has less offerings on
than any other parts suppliers. good quality parts.
Experienced on selling the Carries only limited items

General Trading spare parts for the past 20 now(less than 100 items).
years.
Shivam Have a sound financial Poor Inventory, the stock level

Multipurpose background. is high compared to their sales.
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The Government projects have not been taken into account because these projects have to fulfill
Government procedures regarding parts procurement.
4.3 SWOT Analysis
The SWOT Analysis of Paragon Trading (P) Ltd. is as below:
Strengths Weaknesses
Run by the experienced team of Engineers The working capital of the company is
and overseers. quite less compared to competitors.
The inventory will cover over 500 items
covers mostly consumables and critical
items.
Parts Sourcing will be from OEM
suppliers, which has never been done by
any other companies.
Opportunities Threats
The market prospect of spare parts is high Threat of new entrant is possible due to
as there are many developmental activities growing market.
being carried on. The Government policy in machine import
The working hours of machine is may lead to spare parts market being
increasing leading to increased demand of stagnant.
spare parts. The changing taxation policy may change
the buying behavior of customers i.e.
switching from good quality parts to bad
quality parts.
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There is a big opportunity for the heavy equipment spare parts in the market. The market has
been growing eventually with the increase in heavy equipments and the spare parts market is
expected to grow even further because of the increase in life of equipments.
The heavy equipment spare parts industry also has a potential threat of new entrants entering
rapidly. The booming spare parts industry showed increment of spare parts suppliers from 7 to
21 in the past 2 years. But the 14 spare parts sellers are all dependant on the 7 spare parts
suppliers mentioned above. This may create a big competition in the market with the growing
spare parts demand in the industry.
As the life of equipments goes on increasing, there are many parts which have to be changed in
time. There is a first mover advantage in the spare parts industry for those suppliers who can
identify and forecast the requirement of certain part at a period of time. So, a supplier who wants
to grow in the heavy equipment spare parts market must have a proper technical knowledge of
parts and should be able to order the parts in the right time of requirement.
The company will sell spare parts through the knowledge of skilled manpower and their
experience in this industry. The company plans to sell parts by the expertise of forecasting the
parts requirement by contacting technicians and workshops owners so that the requirement can
be predicted exactly on time.
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Chapter 5: OPERATIONS PLAN
5.1 Spare Parts Supply Process
There are various processes involved during the process of selling parts to customers. The parts
ordering process may vary depending upon the preference of mode of shipment. Usually, the
company wishes to provide the parts in the earliest time to the customers but there are some
limitations in the weight of the parts. Thus the company has to check the parts requirement of the
customer and inform the delivery period to him/her.
The parts supply process starts from contact with the customer at the initial phase of requirement
to providing the spare parts at the earliest possible time. The activities are divided into the
following processes:
Warehouse/ Store
Procurement
Both of these processes are closely linked with each other and failure to address one of the
processes leaves the customer dissatisfied.
5.1.1 Warehouse Processes
The Warehouse processes include all the activities related to inventory, customer management
and providing the orders to procurement department. All these activities are very crucial in order
to leave the customer satisfied. The Warehouse in-charge has to carefully look upon these
activities during operation. The activities related to warehouse are described below:
Communication with Customer
The Warehouse process initially involves meeting the customer and finding the requirement. The
requirement of customer may or may not be available in stock. If the parts are available in stock,
then the parts are billed and sold. When the parts are not available, there should be a time frame
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provided to the customer. This is done by communicating with the Procurement Division. Then a
certain amount of advance money is taken with the customer and the requisition is sent to the
procurement division.
Stock Level
The Warehouse should have a minimum stock level which is pre-defined at the year. The stock
orders are placed by checking the stock level of moving parts time and again. The stock levels
are checked by the Warehouse in-charge and the orders are sent to Procurement department.
Parts Verification and Entry
Once the parts are arrived in the Warehouse, the parts should be verified thoroughly in order to
check if the parts quantity indicated in the document matches with the parts quantity physically.
Parts verification is also important in order to check the quality of parts received. The parts are
then entered in the software like Excel and Swastic. These parts are then decreased from the
stock during the time of billing.
The flowchart for the Warehouse process is given below:
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Figure: The Warehouse Process
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5.1.2 Procurement Processes

The procurement process is related with various activities from parts ordering until parts delivery
to the warehouse. One of the most important criteria in procurement is the selection of right
supplier who can supply good quality parts. Following are the major processes involved during
procurement process:
Selection of Supplier
There are different kinds of supplier who can supply different items with various qualities. The
company will select few suppliers who are the major parts supplier of OEM parts in the Asia
region. These suppliers will be contacted in order to check the availability and price. The parts
suppliers are located in Singapore, Korea, China and Indonesia.
The list of parts suppliers are provided in Annex-4.
Ordering
The procurement department has to set the time period of ordering. The warehouse in-charge has
to provide the purchase order to the procurement in-charge with the level of urgency. The
procurement in-charge will then place the order based on the request. The orders types are:
a) Stock Order: Placed for parts that are continuously sold. The mode of shipment is Sea.
b) Semi-emergency: This order is placed when the parts are required by the company when
there is a sudden market demand. The mode of shipment is Air.
c) Emergency: This order is placed on the basis of customer requirement. These orders are
placed when the customer requires parts within 7 days. The mode of shipment is through
International Courier Service like DHL, FedEx, and TNT etc.
Documentation
The documentation process involves preparation of all the documents related to opening the
Letter of Credit (L/C) or Telegraphic Transfer (TT). The documents must be carefully checked
so that there are no problems from banking procedure to customs clearance. The documents must
27
be initially handed over to the finance for opening TT, if the amount is less than USD 5,000 or
L/C, for stock orders when the amount is greater than USD 5,000. The shipping documents also
must be checked thoroughly to see if the Pro-forma invoice matches with the shipping
documents.
The process flow for procurement is shown in the page below:
28
Figure: The Procurement Process
29
5.2 Quality Management
The company will sell parts on the quality parameter to customer. So, quality management
becomes crucial for the company to compete in the current market. The quality is managed
through the following criteria:
Assessment of Supplier
The company has chosen the suppliers who have their international ISO certification. Also, the
suppliers are chosen through their proven track record in the parts market in the international
scenario. Most importantly, the suppliers have been supplying OEM parts that marks the
supplied parts have a quality as good as in the equipment itself.
Moreover, the company itself will make a supplier assessment each time the parts consignment
arrives at the warehouse. The quality of the parts will be checked through random sampling.
There are lesser chances that the quality of parts that are to be sold will be lesser than expected.
The company will have a policy of setting minimum 70 percent criteria on suppliers
performance. If the supplier fails to meet the criteria, the company will purchase parts from
another supplier selling OEM parts.
Customer Feedback
The company will also be taking feedback on the quality of parts by evaluation of machine
performance. Moreover, there is a warranty provided on parts supplied depending on the parts
category. The qualities of parts that are imported are also accessed through these criteria.
The company focuses to sell parts entirely on quality assurance and thus the mentioned
methodology for checking the parts quality is important.
30
5.3 Location
5.3.1 Head office
The head office company will be located in Teku, Kathmandu. The head office has been located
in Teku considering other parts shops in that area. The head office will have an office for the
Managing Director and the Showroom at the same building.
Teku is the hub for parts sales for automobiles and heavy equipments. So, there is a higher
probability of customer visiting that area for purchasing parts.
5.3.2 Warehouse
The company will have a warehouse at Balkhu, Kathmandu. The warehouse has been located in
that area through a contractual agreement with a workshop. The warehouse is strategically
located in Balkhu considering the cheaper cost of rent than inside the city.
Moreover, the company will expand its warehouse in 3 areas of Nepal namely Butwal, Itahari
and Hetauda on third, fourth and fifth year of the company operation. The warehouse will be
opened in these areas as there are many construction activities going on in that area. Thus, the
maintenance activities of machine will be increasing in the years further. Development of
warehouses in these areas will make the availability of spare parts easier in that region and thus
the machine operating in those areas will not have a hassle to the customer to travel up to
Kathmandu to buy spare parts only.
Another advantage of establishing warehouses in these areas will enable transfer of inventory to
these places so that the operation is decentralized. This will reduce the cost of holding inventory
compared to Kathmandu.
31
5.4 Layout Design
5.4.1 Head Office Layout
The head office will consist of 2 storey building with Showroom on the ground floor and the
office of the Managing Director and associated staffs on the upper floor. The showroom will
only have some display items so that the customer comes in contact in that place. The showroom
will have an area of 100 square feet. The Kathmandu showroom layout is shown in the figure
below:
Figure: Showroom layout
32
The upper floor will have an area of 100 square feet with an office for the Managing Director
and the accountant. The office has been designed keeping in mind to communicate with
customers. The office will also be dealing with procurement activities.
5.4.2 Warehouse layout
5.4.2.1 Kathmandu
The warehouse in Kathmandu will have an area of 500 square feet. The warehouse will be able
to accommodate 6 racks having 20 (length) X 2 (breadth) X 8 (height). The warehouse will be
designed in this manner in order to carry an inventory until five years of operation. All the spare
parts arriving from other countries will be unloaded in this warehouse initially.
5.4.2.2 Warehouse expansion
The warehouse will be expanded after the end of second year of operation in Kathmandu. The
warehouse will be expanded in Butwal, Itahari and Hetauda from third year consecutively. The
warehouse will have an area of 300 square feet in each place. These warehouses will have a
small area for 2 staffs so that they can sell the parts to customer from the warehouse only. The
warehouses will be able to accommodate 3 racks having 20 (length) X 2 (breadth) X 8
(height).
5.5 Supply-chain Management
The company has a simple supply chain as follows:
Supplier Company Customer
33
This supply chain management includes various processes of parts ordering, LC or TT opening,
clearance of parts from customer and providing the parts to the customer at the earliest possible
time.
The most important thing to consider is to look upon the seasonality and the lead time of supply
of parts. The peak season of equipment operation is from September to April and the company
can sell 90% of the parts during this period. Considering this scenario, the company will have the
following ordering schedules:
First Stock Order: Mid of June

Second Stock Order: Mid of November
It takes almost 60 days for the parts to reach Nepal from countries like Singapore and China.
This includes the sailing time and the clearance and Kolkata and Birgunj. The time period of
parts supply process from ordering till warehouse entry is shown below:
34
The above process shows the total time involved in the shipment for stock order parts for selling
from September to January end. Similarly, the second shipment for stock order which is placed
on mid of November will reach Kathmandu on end of January. This stock order will be available
to sell until mid of May.
The spare parts business for heavy equipments shows a seasonality index as the machines do not
operate from May to end of August because of the rainy season.
The company will also order spare parts by air or through express courier service. The air mode
of shipment will only take 15 days from ordering to reaching Kathmandu as the shipment time is
only 2 days. For, express service the parts are delivered to Kathmandu within 7 days of order.
These kinds of orders are based on customer urgent order or when there is sudden demand of
some spare parts in the market. Usually, the mode of payment is TT as the parts ordered are
below USD 5,000.
5.6 Inventory Management
The company will be utmost careful in terms of managing inventory. Most of the competitors are
facing huge losses due to overstocked parts. The company will be order parts which are
applicable for selling parts of maximum 6 months. Thus, the company wishes to achieve
inventory of only 10% of the total order.
The company will cover inventory of parts under following criteria:
Filters and Oils: 40% of total inventory

GET and Undercarriage: 20% of total inventory
Electrical Items: 10% of total inventory
Miscellaneous Items: 30% of total inventory
To minimize inventory and extra costs, the company will be ordering electrical items mostly by
air mode as electrical items have a certain life. The other parts like GET and Undercarriage will
35
only be ordered by sea mode because of the weight of these parts. Filters, Oils and Miscellaneous
parts are fast moving parts, so the company will hold a larger stock compared to other items.
There will be random physical checking of spare parts by classifying the parts on the basis of
percentage of inventory of the particular item versus the percentage of annual usage. This will
give a picture of the status of inventory on-hand. Also, there will be cycle counting of spare parts
on quarterly basis.
36
Chapter 6: MARKETING STRATEGIES AND PLAN
6.1 Current Market
The heavy equipment spare parts industry is currently at a growing stage. The increment in
different kinds of projects like hydropower, irrigation and road development has shown
increment in the demand of construction machine and further the demand of spare parts
requirement. The heavy equipment spare parts industry has some existing players in the market.
These players have their own strategy of cost leadership by selling the parts at a lower cost. But,
these kinds of parts have a very bad quality. Other players have either focus strategy with their
own group of customers like small projects and some fleet owners. Some of the spare parts
sellers have a differentiation strategy by selling parts which are not easily available in the
market. Further, the heavy equipment spare parts industry in Nepal is totally a Word of Mouth
business.
6.2 Market Segments
Site Offices
The market segment of heavy equipment spare parts is as per Geographical region. The
equipments are working in all the three regions, namely, Terai, Hills and the Mountainous
regions. All these equipments operate under some construction companies or some projects.
These projects have a site office in city area or in the district headquarter, i.e., in a district where
the machine is operating. These site offices are responsible to buy spare parts for the equipments
during repair or maintenance.
Workshops
The other category of spare parts buyers are the workshops that specialize in repair and
maintenance of equipments. These workshops are also located in various parts of the country and
these workshops contact the spare parts seller whenever there is a requirement.
37
6.3 Target Market (Market Strategy)
Focus Strategy
During the initial years of company operation, i.e. on year 1, the company will use a focus
strategy to target projects and fleet owners. These owners will be contacted through the
experience and contacts of the Managing Director. The selection criteria of fleet owners will also
depend upon the consciousness and their affiliation towards quality parts. These fleet owners will
be given replacement warranty for a certain period of time depending on the type of the parts
sold.
From the year 2, the company will start penetrating in the market by selling the parts to the
Workshops. The technicians will be contacted by the company and an incentive of 15% will be
given on the parts they purchase. This will go in collaboration with increasing contacts with fleet
owners.
Differentiation Strategy
The company will use a Differentiation Strategy by selling OEM parts which will directly be
imported from trading companies that sell the parts used by the equipment manufacturer itself.
The company will sell good quality parts with replacement warranty for a specific period of time.
6.4 Growth Strategy

The company will follow the growth strategies as mentioned below:
6.4.1 Market Penetration strategy

During the first two years of operation the company will penetrate in the market by the following
manner:
The company will sell the parts to the fleet owners through contacts.
On the second year, the company will sell the parts to the workshops in addition to selling the
parts to fleet owners.
38
6.4.2 Market Development Strategy

From the third year of operation, the company will also use the market development in the
following way:
Establishing warehouses (spare parts shops) in Butwal, Itahari and Hetauda in the third,
fourth and fifth year.
These spare parts warehouses will be opened in order to cater the equipments working in that
area. Secondly, the market development strategy will be implemented anticipating the increase in
developmental activities in Eastern, Mid Western and Far Western developmental region.
6.5 Positioning of the Company
Following factors have been considered while considering the positioning of the products.
The key selling points will be:
High quality products
Products with replacement warranty in case of product failure within a specified period of
time.
So the strategic position of the company will be Product Focused.
6.6 Marketing Mix
As per the marketing strategy of the company, marketing mix has been developed as discussed
below:
39
6.6.1 Product
The company will sell heavy equipment parts that will be imported from various Asian countries.
The product category would include items related to Filters and Oils, GET and Undercarriage,
Electrical Components and Miscellaneous items.
The product categories are selected as these will cover all the parts required for equipment repair
and maintenance. The products imported are selected on the following criteria:
Should be an Original Equipment Manufacturer (OEM) parts.

Supplier should guarantee the quality assurance of these products to the company.
The products that will be sold will be made sure that these are all of good quality. This is because
the company aims to become competitive through product quality.
6.6.2 Pricing
The company will have the pricing factor as below:
Selling Price = Landed cost* 1.5
The landed cost is calculated on the basis of CIF value, bank charges, clearing and forwarding
expenses and inland transportation. There will be an additional 50% margin in the landed cost.
This is because the spare parts market runs with a standard amount of margin. Also, the selling
price is based considering the following factors:
There is a trend of providing discount of 10% on heavy equipment parts market.

An incentive of 15% has to be provided to technicians who recommend the spare parts.
The prices will have a certain provision for providing warranty or contingencies of parts
replacement.
The company will have a pricing structure higher than competitors. This is because the company
itself imports quality parts by paying a good amount. In contrast, a high price can be an indicator
40
for high quality. The customers that are contacted will be justified through the warranty on parts
that the company is giving.
Thus, the company will have a higher price for the parts compared to competitors. The company
will continuously have an effort of bringing better quality parts in the years to come.
6.6.3 Place
Selection of a place is an important criterion in heavy equipment spare parts business. Thus, the
company will open its head office and showroom in Teku, Kathmandu. This is in consideration
with the fact that Teku is a hub for spare parts and most of the customers will visit Teku to find
spare parts required for them.
Furthermore, the company will open its warehouse in Balkhu, Kathmandu because the rent is
cheaper in that area. Also, the warehouse has been strategically been placed with a heavy
equipment workshop to promote spare parts sales.
As a part of company expansion, the company will open its store in Butwal, Itahari and Hetauda.
The branches will be opened in these places to cater the customers of these areas.
6.6.4 Promotion
The heavy equipment spare parts industry is a Word of Mouth business. The company will
promote its product through direct contact with contractors and fleet owners.
The company will basically focus its promotion by participating in the heavy equipment trade
fair organized by Federation of Contractors Association of Nepal (FCAN) yearrly. The purpose
of participation is that all the contractors of Nepal will come to visit in this fair.
41
6.6.5 People
The company will select employees like officer and supervisor who have their knowledge about
the heavy equipment spare parts. These staffs will be trained on timely basis by the Managing
Director himself. The staffs will be trained in order to make sure that these people will be able to
convince customers why they are paying premium amount for the parts they are purchasing and
to differentiate the parts sold by the company and those sold by competitors.
6.7 Marketing Budget

The marketing budget of the company will be as follows:
Months/ Unit
Description year cost Year 1 Year 2 Year 3 Year 4 Year 5
Brochure Expenses 12 1,000 12,000 13,200 14,520 15,972 17,569
Participation in Trade Fair 100,000 100,000 100,000 100,000 100,000
Total NPR 112,000 113,200 114,520 115,972 117,569
The brochures of products will be printed monthly and will be used for marketing products. The
major cost of marketing is taken by participation in trade fair organized by FCAN.
42
Chapter 7: ORGANIZATION AND HUMAN RESOURCE MANAGEMENT
7.1 Legal Incorporation of the Business
Paragon Trading (P) Ltd. is planned to be registered under the Company Act of the Nepalese
Government. It will be registered in the Company Registrars Office, Ministry of Industry. It will
be duly registered in VAT and PAN in tax office. The company will also take permission from
Municipality in order to open showroom in Teku and warehouses in Balkhu, Butwal, Itahari and
Hetauda.
7.2 Ownership Information
The company will be owned solely by Mr. Bikash Nepal. He will have a 100% investment in the
company and future business expansion.
7.3 HR Planning and Function
7.3.1 Organization Structure
The owner will be the Managing Director of the company. The Managing director will be
reported by an officer who is in charge of day-to-day operation. There will be an accountant who
is responsible for all accounts related works and reports to the Managing Director. The
Managing Director will be continuously monitoring the activities in the company. The officer
will be supported by a supervisor and a helper in Kathmandu.
After two years of operation, the company will add 2 staffs in the three branches. There will be a
supervisor and a helper in each branch. These staffs will report to the officer in Kathmandu on
daily basis.
The organization follows a hierarchical structure. The organization structure of the company is
provided below:
43
Managing
Director
Officer Accountant
Supervisor- Supervisor- Supervisor- Supervisor-

Kathmandu Butwal Itahari Hetauda
Helper Helper Helper Helper
7.3.2 Human Resource Policy
Human Resource Policy will be prepared with clear directives on recruiting, employee selection,
training and development, motivation and compensation and benefits and disciplinary code of
conduct. Organization strategies will be linked with HR Planning. Proper Job Analysis with Job
description, Job Specification and Job evaluation system will be prepared.
7.3.2.1 Human Resource Requirement and Job Description
The minimum qualification and job experience requirement for the employees are as follows:
Position Experience Qualification

1. Managing Director 12-15 years B.E. Mechanical
2. Officer 4-5 years I.E. + B.B.S
3. Supervisor 2-3 years B.B.S
4. Helper N/A S.L.C
44
7.3.2.2 Job Description
The Job Description of the employees is given below:
Title Key Function/Responsibilities

1. Managing Director Strategic development of the company
Legal Aspects
Maintaining the office correspondence
Parts procurement from other countries
Supervision of Office employees
Coordinating with banking and tax authorities
2. Officer Check the day-to-day operation related to sales and
warehouse
Check the parts requirement in each area
Contact customer for parts sales
3. Accountant Maintaining the finance of the company
Day to day accounting
Submitting sales return on monthly basis
Preparing the P/L, A/C, B/S on quarterly basis
Maintaining the petty cash accounting
4. Supervisor Responsible for parts sales in the respective area
Check the inventory record on weekly basis
Check the parts requirement in the respective area
7.3.2.3 Compensation and Remuneration
At present our country faces skilled manpower drainage due to trend in pursuing job abroad and
unstable political situation. The company plans to acquire skilled manpower from its initial stage
45
so that the efficiency of the company will be greater as well as the required quality standards can
be maintained.
The staff salary increment as per the current plan will increase by 10% in yearly basis. However,
if employee gives praiseworthy performance and the management feels that the person is an asset
to the company, the uncertainty fund can be utilized to increase the salary further.
46
Chapter 8: FINANCIAL ANALYSIS
8.1 Methodology of Financial Analysis
Conventional method of financial analysis has been adopted. Sales and expenses have been
estimated on the basis of current market price. For sales projection conservative prices have been
taken. Total fixed assets and yearly administrative, promotional and marketing expenses, selling
and distribution expenses and production expenses were calculated to identify the working
capital requirement.
The initial investment has been determined based on the required resources of fixed assets and
working capital. Based on the Revenue and Expenses calculation, income statement and cash
flow projections were done. The actual investment requirements were calculated.
The ratios are also calculated to check the liquidity ratios, profitability ratios and Inventory
turnover ratios. Break Even Point is not calculated as it has been found that the company starts
earning profit from the first year.
8.2 Key Assumptions for Financial Analysis
Following key assumptions have been made while carrying out the financial analysis:
The parts sales have been assumed to be increasing at the rate of 33% per year. The
increment has been in par with marketing and operation plan.
The expenses have been assumed to be increasing at the rate of 10% per year.
The depreciation follows a straight line method with 15% each year.
The tax has been assumed to be 25%.
47
8.3 Investment in Fixed Assets

The total Fixed Asset Expenses for the company in initial year is Rs. 4,758,500 which will
further increase as the year passes by. The company will invest upon its fixed assets again from
the third year when the branches are established
The detailed tabulation of the financial documents is given in Annex: Financial Reports.
8.4 Sales Revenue

The sales revenue of the company in Year 1: NPR 10,000,000
Year 2: NPR 13,250,000
Year 3: NPR 18,000,000
Year 4: NPR 24,000,000
Year 5: NPR 32,000,000
The sales revenue has been calculated on the basis of revenue generated from each product
category.
8.5 Total Expenses
The total expenses of the company in Year 1: NPR 2,265,300

Year 2: NPR 2,414,255
Year 3: NPR 3,160,547
Year 4: NPR 3,950,589
Year 5: NPR 4,689,925
The total expenses has been calculated by considering the expenses covered in office rent,
electricity, telephone and mobile bills, office overhead, staffs salary, selling and distribution
expenses and insurance coverage expenses.
48
8.6 Total Profit (Loss)
The total profit after tax for the company in Year 1: NPR 821,944
Year 2: NPR 1,882,103
Year 3: NPR 2,661,396
Year 4: NPR 3,773,502
Year 5: NPR 5,523,638
8.7 Key Financial Ratios
The key financial ratios are as below:
FINANCIAL RATIOS Year 1 Year 2 Year 3 Year 4 Year 5
1. PROFITABITY RATIOS
GROSS PROFIT RATIO 35% 35% 35% 35% 35%
NET PROFIT RATIO 8% 14% 15% 16% 17%
COST OF GOODS SOLD RATIO 65% 65% 65% 65% 65%
RETURN ON ASSETS RATIO 14% 24% 25% 26% 27%
RETURN ON EQUITY 14% 24% 26% 27% 28%
2. ACTIVITY RATIOS
INVENTORY TURNOVER RATIO 10 10 10 10 10
49
Chapter 9: CRITICAL RISK AND CONTINGENCIES
The critical risks have been segregated in the following areas described below:
9.1 Market Risks

The company is totally dependent upon the equipments operating in the country. These machines
are mostly used for rental purpose. Currently, due to the liquidity crisis, the machines have
possibility that the rent would not be collected in time. This can affect the spare parts market as
the customers might not be willing to do periodic maintenance if they do not have enough
budgets.
9.2 Operational Risk

The operational risk may be because of overstocking of parts. If the parts are ordered without
any verification, there might be chances of overstocking of parts that may lead to increased
inventory and furthermore, there might be possibility of dead stock of parts if a wrong part
number is ordered.
9.3 Human Resource Risk

The staffs working for the company will have a technical knowledge. Since, the technical
manpower are highly in demand in Gulf and Australia now, there are chances of staffs quitting
the job after gaining some experiences.
50
Chapter 10: SUMMARY AND CONCLUSIONS
Nepal is considered as a country with geographical variations. There are various sectors like
hydropower, irrigation, land development and road development that require different kinds of
heavy equipments for their specific purpose. With the increment in requirement of Heavy
Equipments in the last few years, it is obvious that there have been requirements of spare parts
that are used during maintenance of the machines. The spare parts requirements vary from the
very initial phase of machine operation to the scrap period of the machine.
The total market of heavy equipment of spare parts and oils is NPR 814,000,000 which has been
obtained by adding the market of Filters and Oils and other spare parts like GET, Undercarriage,
Electrical components and Miscellaneous items.
The heavy equipment spare parts industry in Nepal already has 7 players. These spare parts seller
have been into operation before 2009 i.e. before the heavy equipment market boomed and have
their own import channel.
Paragon Trading (P) Ltd. will sell quality spare parts through the knowledge of skilled
manpower and their experience in this industry. The company plans to sell parts by the expertise
of forecasting the parts requirement by contacting technicians and workshops owners so that the
requirement can be predicted exactly on time.
51
ANNEXES
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Paragon Trading (P) LTD

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Business Development Plan-

Paragon Trading (P) Ltd.

Submitted By : Benzin Dahal, EMBA Spring 2010

Ace Institute of Management

5.3.2 Warehouse .................................................................................................................... 31

8.3 Investment in Fixed Assets ................................................................................................. 48

Chapter 1: BUSINESS INTRODUCTION

1.1 Background and Business Concept

1.2 Scope of Business Activities

1.3 Nature of Business

1.4 Vision of the Company

The vision of the company is:

1.5 Mission of the Company

The mission of the Company is:

1.6 Goals and Objectives of the Company

The main goals and objectives of the company are:

a. To provide the best quality parts within 1 week of orders received.

b. To be the leading heavy equipment parts supplier within 5 years period.

c. To reach self sustaining profitability within the next five years.

Chapter 2: THE BUSINESS ENVIRONMENT

2.1 PESTEL Analysis

2.1.1 Political Environment

2.1.2 Economic Environment

2.1.3 Social Environment

2.1.4 Technological Environment

2.1.5 Environmental Analysis

2.1.6 Legal Environment

Value Added Tax (VAT)

Permission from the Municipality

2.2 Michael Porters Five Forces Model

2.2.1 Threat of New Entrant

2.2.2 Bargaining Power of Customer

2.2.3 Bargaining Power of Supplier

2.2.4 Threat of Substitute Products

2.2.5 Rivalry among Competitors

Chapter 3: DESCRIPTION OF SPARE PARTS

Filters and Genuine Oil

3.1 Filters and Genuine Oil

3.2 Ground Engaging Tools (GET) and Undercarriage

3.3 Electrical Components

3.4 Miscellaneous Items

The pictures of these product categories are shown in Annex-2.

Chapter 4: MARKET RESEARCH AND ANALYSIS

4.1 Total Spare Parts Market Size

Komatsu : 1,400 units

The cost breakdowns of all of these machines are provided below:

Number of Machines: 2,430

Please refer Annex-3 for sample cost for yearly servicing.

Engine Oil and Hydraulic Oil Market for Heavy Equipments

Consumption of Engine Oil per servicing = 26 liter

Consumption of Hydraulic Oil per machine = 200 liter

4.2 Competitor Analysis

Name of Competitor Current Market Share

Name of Strength Weakness

Experienced and have Not focused to the particular

Over 1000 items stock covers Poor Inventory, volume of sales

Experienced and have good Very limited stock, parts

Aggressive sales and Very limited stock, mostly from

Technically sound, Very limited stock (less than

Experienced on selling the Carries only limited items

Shivam Have a sound financial Poor Inventory, the stock level

4.3 SWOT Analysis

The SWOT Analysis of Paragon Trading (P) Ltd. is as below: