BUSINESS MODEL IN AN FMCG INDUSTRY (FAST MOVING CONSUMER GOODS)

MASTERS ENERGYFEEDBACK FORM
NAME OF HOD:
NAME OF SUBSIDIARY/BUSINESS UNIT: Masters Energy Commodities Trading Ltd
BUSINESS ADDRESS: 31A Remi Fani Kayode Street, Ikeja GRA
PHONE NO:

Below is a business model that can help business owners and entrepreneurs especially in FMCG industry. (FAST MOVING CONSUMER GOODS)

Kindly answer all questions as comprehensively as possible.
1. Describe your business unit, its functions, products (if any) and its objectives?

Masters Energy Commodities Trading Limited is a business entity with vested interests in Fast Moving Consumers Goods (FMCG).
With the re-basing of Nigerian economy in second quarter of 2014, while the petroleum oil & gas accounts for about 14.4%, the real sector
(including agriculture, manufacturing and industry) account for about 54% of $510billion (total GDP). This is where the Commodities unit
of Masters Energy operates.
Masters Energy Commodities’ interest covers but not limited to the followings:
Trading
Manufacturing and
Export

PRODUCTS:
A. TRADING PRODUCTS
• Rice (Trading)
• Wines (Trading)
• Oils and fats (Olive oil, Vegetable oil) (Masters Olive Oil)
MANUFACTURED PRODUCTS
• Packaged Water (Masters Water®)
• Carbonated Drinks (Masters Cola®…)
• Instant noodles (Masters Instant Noodles®)
• Biscuits and snacks (Cheese balls) (Masters Biscuits®/Masters Cheeseballs®)
• Processed fruit and vegetables



2. Explain how the functions of your unit tie in with the overall vision and objectives of the Masters Energy Group.

With over 130% drop in global price of petroleum crude in the last 4years, this development has dealt a big blow in the oil sectors and
all the players both in the upstream and downstream.
Masters Energy Commodities Trading Limited provided a good and alternative diversification base for the parent company, Masters Energy
Group.

3. What are the critical success factors for your business unit? Pls explain in detail.

a. Market research: To use scientific methods to identify viable products
b. Effective product development team
c. Customer Service Relation
d. Cost management and reduction: To ensure competitiveness in the industry.
e. Engagement of professionals and competent hands to oversee strategic positions.
f. Financial discipline
g. Robust working capital

4. What are the major challenges you currently experience as a business unit?

1. Inadequate working capital
2. Lack of clear and functional business structure and organizational chart
3. Non availability of profitable and fast moving products
4. Staff training almost non-existent. No commodity staff has gone on training since the establishment of the unit
5. No business distributorship model
6. Strict compliance of cash and carry based sales model sometimes sabotaged by some staff and out station marketing staff

5. Which regulatory agencies govern the operations of businesses in your industry?

1. Standard Organization of Nigeria (SON)
2. National Agency for Food Drug Administration and Control (NAFDAC)

6. Is your business in compliance with all the relevant regulatory authorities in your industry?
Yes

7. If not, why?
Not applicable

8. How many staff do you currently have in employment?
There are 12 staff pan Nigeria as follows:

 Enugu 2 Marketing
 Onitsha 1 Marketing
 Abuja 1 Marketing
 Lagos 5 Finance 3, Marketing 2
 Lagos 1 Finance, seconded from Dupson***
 Business Devt. 2 Work for all spectrum of commodities units
**** Strong case is hereby made for upgrade to full finance staff

9. Do you have the right human resource mix required to meet your set targets?
• Yes

• Labour/Factory Act related issue to meet set target in the manufacturing sector



10. How many staff do you require to operate optimally?

Staff as presently constituted is adequate for now. However, depending on level of business activity increase, more staff may be required
in the long run



11. Does your business compete favorably with competitors in your industry? If not, why?
Under normal condition, that is given the right product mix, the unit enjoys good patronage, profitability and liquidity. However, due to
the limiting factors highlighted above (i e lack of FMCG in stock at present), competition is anything but intense


12. What are the current limitations to the success of your business unit?

1. Non availability of fast moving and profitable products e.g olive oil, rice, vegetable oil, milk etc
2. Non availability of robust and prudent working capital management. Bank accounts are managed to the exclusion of Commodities management
team
3. Foreign exchange risk – Fluctuation in foreign exchange rate affects pricing on replacement costing model. For example if a product is
imported at say 250NGN/DOLLAR in December 2016 and the product has to be imported at 305/dollar in March 2017, the selling price based on
replacement cost will not be competitive.



13. Can some of your business processes be outsourced to save costs? If yes, name them.

• Yes
1. Transportation and distribution of finished products
2. Marketing-Product branding activities

14. What recommendations would you suggest for the improvement of your internal business processes?

• Cost saving measures
• Responsive Supply Chain Management
• Lean Manufacturing (for manufacturing sector)
• Sound and responsive working capital management
• Product awareness among staff

15. What tailor-made recommendations do you propose to bridge funding challenges in the long term?

1. Disallow treasury dept the sole management of commodities bank accounts
2. Constant stocking and restocking of FMCG
3. Cash and carry based sales for staff and relatives and friends of staff
4. At least 50% of generated profits to be ploughed back to trading

16. Would it be more efficient for your business to operate as a department/sub unit under the company than as a separate corporate entity?
State reasons.

It will not make good business sense to establish a subsidiary and come back to down grade it to a department for the following reasons:
1. Modern businesses are being unbundled in this century and that seems the way forward
2. There is synergy experience
3. Low overheads
4. Room for diversification
5. Risk reduction and management – When a business diversifies the risks are spread
6. Capital preservation – You protect the capital you have because funds are allocated to the subsidiary
7. Ability to hedge – enable the group to grow both when market booms and returns crumble in one sector.

17. Drawing comparisons within your industry, comprehensively describe your five year business projections and plans for business expansion.

1. Excellent customer efficient service delivery
2. Avoidance of wastages
3. Marketing by all staff
4. Pursue continuous product improvement on all product lines
5. Re-engineer west coast storage and sales of products
6. Institutionalize customer feed-back for efficiency and effectiveness
7. Offer ancillary services like pos, paypal, online trading

18. Kindly present the cost benefit analysis for your business expansion projections.

1. Increased customer demand and booming sales, taking into consideration a variety of factors like increased customer base, robust product
awareness, aggressive and bullish marketing
2. No. 1 above goes with the relevant costs. The cost incurred in achieving increased customer demand and booming sales may appear huge and
horrendous but in per unit terms is less than selling price per unit, which in turn results in profit.
3. Other inherent costs include expansion cost, operating cost, cost of granting credit etc
4. After aggregating the foregoing, we can then test the efficacy or otherwise of the expansion programme by calculating pay back period and
return on investment
5. The expansion programme is a success if 4 above turns positive.



19. What are the cost implications/requirements of your projections with the proposed timelines?

1. Staff costs – more staff will be required
2. More funding – adequate working capital
3. Increased credit lines
4. Stock holding costs



20. State how you intend to compete in your industry with your expansion plan.

1. Know the competition – Find out who the competitors are, what they are offering and what their unique selling point is.
2. Know your customers (kyc) – find out what matters to the customers
3. Differentiate – give customers good reasons to always come back
4. Step up marketing strategy – tell customers who we are, what we sell and why they should buy from us
5. Update our image – add aesthetics to our environment and instill good dress code in our marketing force and front desk personnel
6. Look after the existing customers – they are our competitors target
7. Target new markets – this will increase market base
8. Employ skilled, motivated staff – people are often more impressed by a good working atmosphere and benefits such as flexible working and
structured career development than paying a competitive wage
9. Expand our offer – deploy pos, paypal, online payment etc
10. Look to the future – keep up with developments in the sector, follow consumer trends, invest in new technology and have a clear idea of
where to be in the next three to five years.

Thank you.