DramaProx Productions Company Business Plan

Executive Summary

This business plan is about DramaProx Productions, which is a startup company dealing in the production of drama programs for the UK entertainment industry. Research studies show a significant market share and penetration capabilities with innovative political episode programs in demand in the UK entertainment market that present with an exploitable business opportunity. Analysis of secondary and primary research data revealed a strong positive trend among different age groups for drama episodes programs. In a market with perfect competition, the results show a high penetration rate, market capitalization, and profit margins could be attained within three years.

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General Company Description

DramaProx Productions aims to produce drama episodes for the UK entertainment industry. The company will focus on the provision of unique drama programs consisting of different episodes in the UK entertainment market. The aim is to generate revenue from entertainment while increasing the market share across the entire local and global markets to generate more revenue and give the company global status.

Mission Statement

To be the leading producer of world-class political drama programs for the UK entertainment industry.

Goals and objectives

DramaProx Productions to become the source of entertainment offering unique drama entertainment programs for the local UK and global markets.

  1. To create a 20% market penetration rate in the first six months of production
  2. Attain a break-even point with 100 units in the first six months of production
Break-even point.
Figure 1: Break-even point.

Figure 1 reports the total number of sales for profits to reach the margin of safety to cover variable and fixed costs to make the total revenue greater than the total expenses resulting in excess revenues that can sustain the business (Alasadi & Al Sabbagh 2015).

The Concept

The idea is to invest in the UK entertainment industry by providing high-quality world-class drama programs.

Feasibility Report

The UK film industry provides a market opportunity for drama programs because of the strong 9% positive growth in the number of cinema tickets sold between 2014 and 2015 locally. This amounts to net positive profits of £171.9 million (Film forever, n.d). Driven by the concept of figures, Gruber et al. (2015) agree with Film forever (n.d) that the figures released between 2006 and 2016 show a relatively stable and rapidly growing drama entertainment sector in the UK with an annual turnover of £7.3 billion, making an 11% share of the global box office volume of tickets sold per annum, indicating a niche market.

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Business description

This is a business that specializes in the production of world-class drama programs for the UK and the global entertainment industry (Verzuh 2015). The basis is Zhu (2013) who views the UK entertainment market to be relatively mature, dynamically changing, and increasing demand for high quality scripted content. Such a situation unfolds into strong market forces and demand for locally produced content that outstrips the imported series (Stutely 2012). The argument by Ryan (2016) is reinforced by ITV’s acquisition of the Mammoth Screen and Twofour Group.

Disposable income.
Figure 2: Disposable income.

Figure 2 reports the status of the GDP per person and disposable income per household in the UK, which is a strong indicator of the consumption readiness of drama programs in the UK (Chibnall & McFarlane 2009). Each year shows an increase in disposable income which fell slightly in the 2014/2015 report but remains robust. According to Kroenke and Boyle (2015) and Luostarinen and Gabrielsson (2006), this responds well with the behavior of high-income groups.

Secondary Research

An insight into the level of satisfaction based on the UK Customer Satisfaction Index shows a strong level of satisfaction with foreign drama programs other than local drama programs (Christopherson 2013). An example includes the West wing, which was rated at 8.3 out of 10 indicating an attractive tendency towards foreign drama compared with local programs. The emerging gap can be filled by providing local high-quality political programs. Primary research conducted between 2016 and 2017 reveals the need to fill the gap as reported in figure 3.

Level of satisfaction.
Figure 3: Level of satisfaction.

Macro Analysis

A significant number, consisting of 8,205 productions are scheduled to be released in the 2017 season alone. These include 376 productions that are in development, 120 in pre-production, and 196 in production. A critical analysis shows an industry that consists of drama programs that go through different stages of production and viewing.

Competitors

Global media companies have cut a significant market share by offering different drama programs for entertainment such as the west wing television series by Warner Bros. Television. According to market research extrapolation views by Jarzabkowski and Kaplan (2015), Hair (2015), and Evans (2015), in the UK alone, the number of competitors has grown by 32% from 2009 to 2016. By Alasadi and Al Sabbagh (2015), performance categorizations of companies in the field of drama include Red Production Company, Hartswood Films / BBC Wales, and Kudos Film & Television as among the best. As of now, the number of companies producing film and drama programs has grown to 6,000 with 405 distribution channels as well as 215 film exhibitions. Distinctly, the small companies have a turnover which is under £250,000

Primary Market Research Segments

Based on the concept of market ratios by Ferraro and Brody (2015), the proportion of adults who attend entertainment and specifically drama events constitute 25% with 21% claim that they regularly attend the theatre. According to Fayolle and Liñán (2014), an increase in demand for drama programs among all age groups is uniform.

Table 1: In-venue and online survey results.

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Site A Site A Site B Site B
Age cohort Online Survey (%) In-venue (Audience) (%) Online Survey (%) In-venue
(Audience) (%)
18-34 36 23 27 17
35-44 17 10 18 14
45-54 24 19 23 22
55-64 17 23 21 25
65- 7 26 10 22

Table 1 reports on the tendency of consumer behavior of people aged between 18 and 34 interested in drama entertainment programs. The highest has 36% followed by the 45-54 cohort with 24% for the online survey and 23% and 23% respectively for the in-venue survey for site. A similar trend was observed in site B with 27% for the 18-34 cohort and 23% for the 45-54 cohort in the online survey having a positive stance with 17% of the 18-34 cohort showing a 17% positive stance and 45-54 cohort showing a 22% positive stance. Analytically, the responses from both sites, A and B for the different age groups show strong demand and market for the programs.

Porter’s Five Forces

Figure 4 shows Porter’s five forces model providing a summary of the nature of competition and the nature to marketing environment the company is to operate.

Supplier power

The supplier in the drama industry will include the company that produces the drama programs.

Buyer Power

UK buyers have a strong and entrenched desire for drama. The UK market attained £1.1 billion in sales despite the temporary dip in 2013. A £1.6 billion increase occurred in 2016.

Competitive Rivalry

Competition from the US drama products was equivalent to 26% while that from UK films was 10% with the UK market share being 16% of the global drama entertainment industry.

Threat of Substitution

The substitutes include the British drama television series, which include the British comedy-drama television programs‎ (2 C, 70 P), British drama television series by decade‎ (7 C), ITV television dramas‎ (6 C, 477 P), and the British teen dramas‎ (19 P) among other programs.

Threat of New Entry

Due to the barriers of high capital, marketing, and production challenges as well as training costs, the number of new entrants could be small.

Porter’s Five Forces Model.
Figure 4: Porter’s Five Forces Model.

The Marketing Plan

Primary research conducted between January 2016 and February 2017 reveals a decline in the level of satisfaction among customers from 80% for international drama programs to 76% in the same period.

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Mission

To create new political drama programs that attract new and old customers.

Business goals

  1. Provide innovative world-class drama programs for the entertainment industry in the UK.
  2. Build credible demand for drama programs as a new product line to achieve a 25% market penetration in the UK.
  3. Create a new market frontier for the DramaProx Productions drama programs

Marketing Objectives

  1. To achieve 20% of sustainable profits by the first year of production
  2. To penetrate the new market and achieve a 20% market share by the first year
  3. Create a strong brand with a customer loyalty rating of 50%

Table 2: Marketing Strategy.

Market Growth Market development strategies (Ross and Byrd 2015)
Use of social media such as Facebook and YouTube
Use of streaming media
Targeting theatre
Diversification strategies
Through target markets
Innovative political drama programs
Create programs for all audiences
Provide different episodes with unique information in each
Market penetration strategies (Rothaermel 2015)
Use of social media, targeting different audiences
Product development
Political drama programs
Use of reality information

Table 2 is about the marketing strategy. The core business will be to create serial political drama programs similar to the American version of West Wing.

Revenue Model

DramaProx Productions will adopt both the low cost and Recurring Revenue models as the most appropriate frameworks for growth and profitability (Wahab, Al-Momani & Noor 2015). According to Bodea et al. (2015), the low-cost model reflects the value proposition of drama programs to driving up sales.

SWOT Analysis

Table 3: SWOT analysis.

Strengths
Innovative episodes
UK based
Weaknesses
Low market penetration
A new market entrant
Opportunities
Growing entertainment market share
Threats
International drama programs such as the West Wing

Positioning strategy

Product positioning in the drama programs production market that is characterized by perfect competition difficulty task (Alasadi & Al Sabbagh 2015). However, creating political drama programs will provide the platform for product positioning.

Distribution channels

A website will be created to host the programs based on the pay and download model to access the programs (Baker 2014). A customer will be required to make online payments using the visa card and other viable payment modes.

Promotion

This will be achieved by advertising the episodes on different media platforms such as TV channels and social media platforms such as Amazon and Facebook among others (Salamzadeh & Kawamorita Kesim 2015). According to Ravindran (2016), discounting some episodes and sending messages via mobile phones will be another promotion platform.

Pricing

Studies show pricing to be a strong indicator of the quality of a product. Low prices create the perception of a poor quality product while high prices create the perception of a high-quality product (Nicolò 2015). Studies by Narayanan and Fahey (2005) and Hopewell (2016) on consumer behavior show that highly-priced entertainment programs in the UK attract a higher volume of customers than low priced programs.

Customer relationship management

  1. Address customer complaints immediately as they arise
  2. Communicate via emails ‘
  3. Provide a common on-line platform for collecting data about customer satisfaction

Operational Plan

Launching plan

An appropriate venue and office will be located and hired for rolling out the entertainment programs (Fleisher & Bensoussan 2015). According to Wild, Wild, and Han (2014) and Kasabov (2015), an initial roll out incentive will be provided as the first episode at discounted prices while successive programs will be fully priced (Armstrong, Adam, Denize & Kotler 2014). Bryman and Bell (2015), Brinckmann and Kim (2015), and

Davila, Foster, and Jia (2015) note that strategies should be in place to increase the size of the audience in the first 3 weeks.

legal Issues

The company will invoke the Insolvency Act 1986 and the Companies Act 2006 as a way of compliance with the policies and laws for establishing a limited company. Under the company act, the company will define the directors’ duties and other officers working for the company (Finch 2016). The discourse is in appendix II.

Management Team and Organization

Management Structure.
Figure 4: Management Structure.

The company will start with a lean management staff which will increase as the capital and market share increases as shown in figure 4. Appropriate recruitment practices and policies as well as disciplined procedures and motivation will be used in the recruitment and selection of employees, which underpins the company’s key growth strategy.

Customer value proposition

The drama programs are designed with packaged political entertainment episodes for different age groups ranging between 18 years to 65 years.

Financial Analysis

This is based on the following assumptions:

  1. Employees will work permanently
  2. Salaries will depend on company profits.

Discourse in appendix I.

Reference List

Ahmed, F, Capretz, L F, Sandhu, M A & Raza, A, 2014, ‘Analysis of risks faced by information technology offshore outsourcing service providers’, vol. 6, no.8, pp.279-284.

Alasdair, R & Al Sabbagh, H 2015, ‘The role of training in small business performance’, Business and Management, vol. 1, no. 7. P. 1-19

Armstrong, G, Adam, S, Denize, S & Kotler, P, 2014. Principles of marketing. Pearson Australia, Pearson Education, Canberra.

Baker, M J., 2014. Marketing strategy and management. Palgrave Macmillan.

Bodea, C N, Mogos, R I, Dascalu, M I, Purnus, A & Ciobotar, N G 2015, ‘Simulation-Based E-Learning Framework for Entrepreneurship Education and Training’, Amfiteatru Economic, vol. 38, no. 17, pp. 10.

Brinckmann, J & Kim, S M 2015, ‘Why we plan: the impact of nascent entrepreneurs’ cognitive characteristics and human capital on business planning’, Strategic Entrepreneurship Journal, vol. 2, no. 9, pp. 153-166.

Bryman, A & Bell, E 2015, Business research methods. Oxford University Press, USA.

Chibnall, S & McFarlane, B 2009, The British’B’Film. Palgrave Macmillan.

Christopherson, S 2013, Hollywood in decline? US film and television producers beyond the era of fiscal crisis. Cambridge journal of regions, economy and society, vol. 1, no. 6, pp. 141-157.

Davila, A, Foster, G & Jia, N 2015, The valuation of management control systems in start-up companies: International field-based evidence. European Accounting Review, vol. 2, no. 24, pp. 207-239.

Evans, V 2015, The FT Essential Guide to Writing a Business Plan: How to win backing to start up or grow your business. Pearson UK.

Fayolle, A & Liñán, F 2014, ‘The future of research on entrepreneurial intentions’, Journal of Business Research, vol. 5, no. 67, pp.663-666.

Ferraro, G & Brody, E K 2015, Cultural Dimension of Global Business. Routledge.

Film forever, n.d, New BFI Statistics Show Robust Year for Film In The UK In 2016: Highest Ever Film Production Spend, Continued Box Office Success, Web.

Finch, B 2016, How to write a business plan. Kogan Page Publishers.

Fleisher, C S & Bensoussan, B E 2015, Business and competitive analysis: effective application of new and classic methods. FT Press.

Gruber, M, De Leon, N, George, G & Thompson, P 2015, ‘Managing by design’, Academy of Management Journal, vol. 1, no. 58, pp. 1-7.

Hair, J F 2015, Essentials of business research methods. ME Sharpe.

Hopewell, J 2016, Mipcom 2016: World’s TV Drama Boom Increasingly about Pay TV, Web.

Jarzabkowski, P & Kaplan, S 2015, ‘Strategy tools‐in‐use: A framework for understanding “technologies of rationality” in practice’, Strategic Management Journal, vol. 4, no. 36, pp. 537-558.

Kasabov, E 2015, Start‐Up Difficulties in Early‐Stage Peripheral Clusters: The Case of IT in an Emerging Economy. Entrepreneurship Theory and Practice, vol. 4, no. 39, pp. 727-761.

Kroenke, D M & Boyle, R J 2015, Using mis. Prentice Hall Press.

Luostarinen, R & Gabrielsson, M 2006, ‘Globalization and marketing strategies of born globals in SMOPECs’, Thunderbird International Business Review, vol. 6, no. 48, pp. pp.773-801

Narayanan, V K & Fahey, L 2005, ‘The relevance of the institutional underpinnings of Porter’s five forces framework to emerging economies: An epistemological analysis’, Journal of Management Studies, vol. 1, no. 42, pp. 207-223.

Nicolò, D 2015, Towards a theory on corporate reputation and survival of young firms. Procedia Economics and Finance, vol. 1, no. 22, pp. 296-303.

Ravindran, M 2016, A great market in store, Web.

Ross, L W and Byrd, K 2015, Business Plan Competitions: Start-Up’Idols’ and Their Twenty-First Century Launch Pads.

Rothaermel, F T 2015, Strategic management. New York, NY: McGraw-Hill.

Salamzadeh, A & Kawamorita Kesim, H 2015, Startup Companies: Life Cycle and Challenges.

Ryan, D 2016, Understanding digital marketing: marketing strategies for engaging the digital generation. Kogan Page Publishers

Stutely, R 2012, The definitive business plan: the fast track to intelligent planning for executives and entrepreneurs. Pearson UK.

Wahab, S, Al-Momani, K & Noor, N A M 2015, The relationship between e-service quality and ease of use on customer relationship management (CRM) performance: an empirical investigation in Jordan mobile phone services. The Journal of Internet Banking and Commerce, vol. 1, no. 1, pp. 2010.

Wild, J, Wild, K.L & Han, JC 2014. International business. Pearson Education Limited.

Zhu, Y 2013, Television in post-reform China: Serial dramas, Confucian leadership and the global television market. Routledge.

Verzuh, E 2015, The fast forward MBA in project management. John Wiley & Sons.

Appendix I

Table 5: Financial analysis.

Liabilities and Capital
Liabilities
Current Borrowing £0
Long-term Liabilities £0
Accounts Payable (Outstanding Bills) £610
Additional Current Liabilities (interest-free) 1000
Total Liabilities £710
Capital
Total Planned Investment £115,110
Loss at Start-up (Start-up Expenses) (£4,760)
Total Capital £110,460
Total Capital and Liabilities £110,960
Total Funding £115,890

Table 5 reports the Accounts Payable (Outstanding Bills) of £610 with the total liabilities being £710. The Loss at Start-up (Start-up Expenses) amounts to £4,750 while the planned investment is equivalent to £115,110. The report shows that the total capital and liabilities amount to £110, 960 while the total capital is £110,460, which amounts to £115,890.

Financial ratios

Table 6: Financial ratios.

Common Financial Ratios
Debt Ratio (Total Liabilities / Total Assets) 0.58
Current Ratio (Current Assets / Current Liabilities) 1.08
Working Capital (Current Assets – Current Liabilities) 660
Assets-to-Equity Ratio (Total Assets / Owner’s Equity) 2.29
Debt-to-Equity Ratio (Total Liabilities / Owner’s Equity) 1.27

Table 6 reports the financial ratios of the expected performance of the business.

Start-up Costs

Table 7: Start-up Costs.

Non-cash Assets from Start-up £3,200
Cash Requirements from Start-up £108,950
Additional Cash Raised £0
Cash Balance at the Starting Date £108,950
Total Assets £111,950
Start-up Funding
Start-up Expenses to Fund £5,850
Start-up Assets to Fund £112,050
Total Funding Required £118,700

Table 7 is a detailed account of the non-cash assets with a start-up of £3,200 and cash requirements with start-up totaling £108,950 as well as the cash balance on starting date of £108,950. The value of the total assets is £110,950 with start-up expenses to fund being £112,250 and the total funding required being £118,700.

Funds Breakdown

The startup capital sums up employee salaries that are projected to be £ 50,000 with the office rent being £2000. Hardware devices such as computers and other data collection devices are projected to cost £8000 and the software will cost £10,800. The balance from the £115,700 of the total funding required could go to maintenance and other accruing expenses. Besides, additional funds will be required for the advertisement and marketing that is estimated to be £7500.

Working Capital Requirements

Based on 45 credit terms, it is possible for the working capital to be as follows:

  1. Accounts receivable = 45 x 282,500 / 365
  2. Accounts receivable = 34, 828
  3. Accounts receivable % = (34,828 / 282,500) ×100% = 12.328%

The results imply that the working capital requirements when credit has been offered for to 45 days become £ 282,500.

The Net Working Capital Requirement was arrived at by using accounts payable, inventory working capital requirements, and accounts receivable. This can be expressed as: Net working capital requirement = Accounts receivable+ Inventory – Accounts payable, which is equal to 13.9% networking capital. Improving the terms of service for 45 days more could increase by 41.1%.

Sales Forecast

The sales are forecasted to increase rapidly because of the increasing demand drama programmes as shown in table 8.

Table 8: Sales forecast.

Sales Forecast
Year 1 Year 2 Year 3
Sales
Consulting fee £19,000 £245,000 £550,000
Other £0 £0 £0
Total Sales £19,000 £250,000 £550,000
Direct Cost Year 1 Year 2 Year 3
Consulting services £2,340 £46,800 £77,220
Other £0 £0 £0
Subtotal Cost of Sales £2,340 £76,800 £87,120

Table 9: Three year cash flow projections.

The Three Year Cash Flow Projection
Years INITIAL 1 2 3
Initial cash
Cash at Start of Period £0 £500,000 £276,005 £360,230
CASH FLOWS FROM OPERATIONS
+ Revenues from Sales £1,245,000 £1,743,000 £2,739,100
– Variable Costs
– Materials used £250,000 £350,000 £550,100
– Labor incurred £100,000 £140,000 £220,100
– Additional overhead £50,000 £70,000 £110,100
– Sales or billing Commissions £74,700 £104,580 £164,140
– Fixed Costs
-Hardware and software Operations £500,000 £500,000 £510,000
– Telecommunications £8,000 £8,000 £8,000
– Legal Services provisioned £20,000 £20,000 £20,000
– Accounting Services offered £20,000 £20,000 £20,000
– Insurance Services £100,000 £100,000 £100,000
– Personnel Costs
– Administration Salaries £56,000 £56,000 £56,000
– Sales and marketing Salaries £144,000 £144,000 £144,000
– Other Personnel Overheads £30,000 £30,000 £30,000
Operations Sub-Total (£107,700) £200,420 £816,660
CASH FLOWS FROM INVESTMENTS
– Hardware and Software Applications £1,500,000
– Equipment and data communication tools £750,000
Investments Sub-Total (£2,250,000) £0 £0 £0
CASH FLOWS FROM FINANCING ACTIVITIES
+ Sales of Equity £1,500,000
+ Commercial Loans £1,250,000
– Loan Repayments £116,295 £116,295 £116,295
Financing Sub-Total £2,750,000 (£116,295) (£116,295) (£116,295)
ENDING CASH
Cash at End of Period £520,000 £276,015 £360,135 £1,060,595

Appendix II

Company Ownership

The DramaProx Productions is majority-owned company by Dusman Gonzaga and James sherfield. Mr. Gonzaga owns a Bachelor’s Degree in Economics with the accounting option from the University of Essex. He has seven years of working experience as a business consultant besides previously owning the ABC drama production company for four years. Mr. Sherfield has extensive experience in sales and marketing activities besides owning a significant number of contacts in the entertainment industry that he will use to leverage the new venture to make it a profound success. He has a five years working experience as manager of the Battlestar Galactica entertainment company that specializes in political drama.

DramaProx Productions will hire a full time manager who will be directly responsible for the day to day company operations. The candidate has four years working experience as a manager of a drama production company who oversaw the production of the Game of Thrones, which is a well-known and top rated American fantasy drama. The core responsibilities include the management of staff, developing a marketing strategy for the drama programmes, ordering inventory, and dealing with day to day operations in drama productions.

Appendix III

Action areas

Action area Action time (2017)
Writing the business plan January
Hiring Office space February
Staffing training and development March
Installation and testing of management information systems April
Marketing strategy May/June
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