Orco's Insurance Strategy for Business Protection
Orco should have various types of insurance in place to safeguard its business operations. These include Product Liability, Employers Liability, Public Liability, Motor Insurance, and Goods/Cash in Transit. Each type of insurance serves a specific purpose in shielding the business from potential risks and liabilities, such as claims from customers, employees, or the public, accidents, theft, or damage to goods and cash during transportation. Implementing a comprehensive insurance plan is crucial for Orco's business continuity and risk management.
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Presentation Transcript
Discuss the various types of insurances that Orco should have in place in order to protect the business. (20 marks) (4 x 5) Name (2) Explain (2) Link (direct quote/statement/phrase) (1) 1. Product Liability: Protects the business in the event of claims made by customers who suffer loss or injury while using the firm s products. The business makes a range of organic cosmetics, including shampoos, conditioners, facial creams, body lotions, fragrances, etc.
2. Employers Liability: This covers the firm against claims made by employees who have accidents or are injured at work. ...Seven staff are employed in the manufacture and distribution of the products . PRSI and USC: The employer must make PRSI contribution on behalf of each worker. 3. Public Liability: Insurance cover for the business which protects the business against claims made by members of the public who suffer injury of loss from an accident on the business premises or from soma action (or inaction) by the business. A shop outlet attached to the manufacturing plant allows customers to buy direct from the firm .
4. Motor Insurance: This is compulsory by law. The minimum insurance required is third party insurance. Orco may also take out fully comprehensive insurance. The firm has two delivery vans on the road . 5. Goods/Cash in Transit: Provides cover for loss as a result of goods or cash being transported, e.g. goods being damaged or stolen during transportation or cash being stolen while being brought to the bank. A large part of the business involves Orco selling to trade customers .
A Business Plan is a statement issued by the owners or managers of a business outlining how they expect the business to develop over the years ahead. The business plan serves as a blueprint for the future of the business. (5 marks)
(ii) Draft a Business Plan for Orco under five headings. Refer to text & make any assumptions. (35 marks) 5x7 marks (Heading (2) Information (3) link (2)) Business Description/ Executive Summary 1. Orco is a business set up to manufacture and sell a range of organic cosmetics, both to the consumer market and to trade customers. The business is run as a partnership structure with two equal partners. A Deed of Partnership has been drawn up to govern the operation of a partnership.
Orcos goals are to have a presence in pharmacies and supermarkets nationwide, with the long term goal to win contract with UK pharmacy chains. Orco s Mission is to have high quality manufacturing facility, creative marketing and a comprehensive distribution network including retail outlets, internet sales and a customer catalogue. Orco is seeking funding to finance its growth in the Irish and UK markets. Financial forecasts included in this plan show how break-even was reached in 2010 and the company made a small profit in 2011.
Details of Owners/Management Orco was set up in Dublin in 2008 by Donna Musgrave and Rachel Doran. Its business address is Unit 12, Belgrove Business Park, Dublin 9. Donna has a Science Degree and has been working in the R&D Dept. of a large US cosmetics firm for 8 years after graduation in 2000, while Rachel has been running her own beauty salon for 10 years before meeting Donna at a cosmetics fair in Dublin. Both owners are equal partners and equal decision-makers in the business.
2. Manufacturing and Production Manufacturing takes place in the factory unit in Belgrove Business Park. Seven staff are employed in the manufacturing and distribution of the products. A system of Batch production is used, with the production of some products sub-contracted out to a company in the South of England who have specialised equipment. All ingredients used are from natural sources. A Quality Control system has been put in place which involves weekly inspections of the plant by Donna and Rachel.
3. Market Analysis Orco is focused solely on the female market. The potential market in Ireland is 1.1million women between the ages of 18 and 65. Extensive market research was carried out on the cosmetics industry three months before the business was set up. They have identified their target market as this 18-65 year old female group. Further segmentation of the market identifies specific target markets based on age and spending power. For example, different products are aimed at 18-30 year olds, 30-50 year olds and over 50 s. The trade sector of the market, i.e. hotels and leisure centres and beauty salons is heavily saturated with most of these already with long term suppliers. Five main competitors have been identified, who have approx. 80% of the market. However none of them are dedicated to producing organic cosmetics. This is their USP and gives them access to a strong niche market.
4. Marketing Strategy Pricing: Cost Plus Pricing will apply to all sectors. Penetration Pricing will be used with the trade sector by offering a discounted price to gain entry to this lucrative sector. Catalogue and internet customers will pay normal prices. Promotion: Personal selling is carried out by Donna and Rachel with the pharmacies, hotels and beauty salons. A glossy catalogue is left in every venue. Donna and Rachel attend wedding and trade fairs to win this type of business. The companieswebsitewww.orco.ie is easy to navigate and updated regularly. Orders can be placed and deliveries organised easily. Online customers are sent an e-mail once a month including details of special promotions. They have proven very successful in increasing sales. The delivery vans have the companies products and brand advertised on the side. Distribution: the channels of distribution are outlined above. Direct consumer sales take place in the shop outlet, online and through personal visits to trades. Trade sales and online sales are delivered directly. At present online sales account for 20% of sales this is hoped to increase to 40% within the next two years.
5. Financial Analysis Orco made a small profit in 2011 after breaking even in 2010. Expansion is expected to be financed by; bank loan 75,000, shareholder investment 50,000 and equity finance from Donna and Rachel of 25,000. Liquidity and Profitability Ratios are encouraging, with no cashflow problems. This shows that they will have no problem repaying the bank loan. Projected profit and loss accounts till 2015 are included. These show profits of 95,000 in year 2012 rising to 225,000 in 2015. Profit margins are shown to be 2% higher in the consumer segment of the market which reflects the discounted prices offered to the trade customers.
(c ) Discuss the implications for Orco of changing their structure from a partnership to a private limited company. (20 marks) 4x 5 Implication (2) Explain (2) link (1) 1. Shares: With up to 50 shareholders, the company will be able to raise additional finance for expansion. With an investment of 150,000 needed. Donna and Rachel might consider bringing in shareholders. 2. Liability: The shareholders have limited liability in the event of the business failing, they will only lose the amount of their investment not their private assets. If Orco were to fail then Donna, Rachel and any other shareholders would only lose the amount they paid for their shares.
3. Legal Identity: The company has a separate legal identity from its owners. The firm would be sued and not the owners. If Orco were to be sued by any customers who felt that the products were responsible for any loss or injury to them, the company would be sued and not Donna and Rachel personally. 4. Loans: Generally, companies have better credit ratings than sole traders or partnerships. When seeking finance in the future then a limited company like Orco Ltd. May be looked on more favourably than a partnership business.
