NORTH SOUTH UNIVERSITY

Report on Creating A Business Plan

Assigned Company: Pandora (Origin: Denmark)
Competitor: Diamond World Ltd. (Origin: Bangladesh)

FIN444 (Section: 6)
Summer 2020

Submitted to:
Mr. Rushdy Md. Bakth
Lecturer, Department of Accounting & Finance
North South University

Submitted by:

Group: Andromeda

Name ID
Nuzhat Bint Hassan Chowdhury 1713081620
Maliha Haque 1721977630

Date of Submission: 8th September, 2020

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 Executive Summary
Pandora is a world-famous brand that has created an impressive reputation for itself around the
world. This report is a consolidated business plan of how, when, and why we will bring the brand
Pandora to Bangladesh as we try to forecast and conclude how the brand would perform if it
started operations in Bangladesh and also compare its performance to that of a Bangladeshi
jewelry retailer, Diamond World Ltd. We have considered Diamond World to be a competitor of
Pandora. The report includes a brief description for each company and a competitor analysis that
includes a SWOT analysis and suggests ways Pandora can overtake Diamond World once it
starts operations in Bangladesh. The entry strategy part of the report explains our plans of setting
up, financing the business, why we will choose Franchising as our business method along with
government restrictions we have to keep in mind. It also includes a brief marketing plan to attract
more clients, a forecasted income statement and balance sheet for Pandora of the next three
years, along with a forecasted income statement comparison with Diamond World. We have also
concluded how much remittance will be sent to the parent company, given an agreement of 50%
net profit to be sent as remittance, and how it will be affected due to exchange rate fluctuations.
To reduce exchange rate risk, we have included our potential plans on methods to hedge our
payables against exchange rate fluctuations as well. The report reflects our conclusion that it is a
profitable business idea to bring Pandora to Bangladesh.

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 Table of Contents

Content Page no.

Company Description 4

Competitor Analysis 5

Entry Strategy 6

Marketing Plan 8

Forecasted Income Statement 9

Forecasted Balance Sheet 10

Diamond World’s Forecasted Income 11

Statement
Transferring Remittance 12

Reducing Loss Due To Exchange Rate 13

Fluctuation
Conclusion 14

References 15

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Company Description
Pandora is an international Danish jewellery manufacturer and retailer that was founded in
1982. It is one of the leading and most popular fashion jewellery brands in the world and is
known for its rings, necklaces, and its signature charm bracelets that encourage the repeat
purchase of charms. Charms account for more than 50% of their sales. The brand offers a variety
of premium and mid-premium jewellery that are marketed as ideal gifts for mainly women.
Pandora is the world's third-largest jewellery company in terms of sales and has a production site
in Thailand to take advantage of low production costs and markets its products in more than 40
countries. Pandora became a publically traded company in 2010 and has a market capitalization
of DKK 27 billion. Their customer base includes women and girls from middle to high income
households.

Diamond World Ltd. is a Bangladeshi jewellery retailer that was founded in 2005 that
exclusively has a national presence in Bangladesh. It currently has 22 outlets in the country. It is
best known for its pricey diamond, gold, and platinum jewellery and has become one of the
largest jewellery retailers in Bangladesh. It was recently named the first company to legally
import gold into the country and is hoping to start exporting jewellery by 2021. Diamond World
is a private limited company but plans on becoming enlisted in the future. It is the first
Bangladeshi precious metals jewellery retailer that gives customers the option to buy products
onlinei. Their customer base includes high income Bangladeshis, mainly women.

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Competitor Analysis
Pandora
Strengths: Pandora has an international presence and is considered a trendsetter. It has a
signature product they are well known for- charm bracelets. These bracelets come in a variety of
price points, which has created a larger customer base for the brand.
Weaknesses: Decreased advertisement and relevancy have weakened the appeal of the brand that
it used to have. Their product portfolio is limited to gems and jewels, providing fewer options to
customers than many of their competitors.
Opportunities: Expansion in South Asia where jewellery made of precious metals is commonly
bought as an asset or in large quantities for weddings.
Threats: Political unrest in Thailand can disrupt production as Pandora’s production site is
located there. Rising prices of gold and the great popularity of competitors like Swarovski,
Chamilia, and Tiffany & Co. also pose a threat to the company.

Diamond World
Strengths: Recent success in importing gold into Bangladesh legally which will allow them to
sell it at a lower price than competitors who smuggle it illegally. The brand name has not been
tied to any scandals or illegal activities unlike some of their competitors, which has allowed
Diamond World to uphold a good reputation.
Weaknesses: Lack of marketing and distinction from other jewellery retailers in Bangladesh. The
company is also limited to a national presence rather than an international one. All their products
are quite expensive which narrows down their customer base.
Opportunities: Becoming enlisted can help the company raise funds for expansion beyond
Bangladesh and capture a larger market.
Threats: Their main competitors include Amin Jewellers, Taka Jewellery and Apan Jewellers.
All of their competitors have had a longer presence in the market and are therefore more well
known among Bangladeshis.

Overtaking Competitor
Pandora’s international brand recognition and trendsetter reputation gives it an advantage over
Diamond World. Along with luxurious accessories that appeals to affluent customers
specifically, Pandora also offers customizable and more affordable jewellery options of high
quality, unlike Diamond World. This distinction will allow Pandora to have a customer base that
may buy these products for themselves or as gifts since they are more affordable. The brand also
allows customers to personalize their jewellery to resonate with their memories, emotions and
need for self-expressionii, which is an experience no jewellery retailer in Bangladesh provides.

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Pandora has established a target of seven annual product launches to the stores. This allow stores
to have new products assortments during occasions like festivals or wedding season and drive
traffic even in low peak periods. New products and categories will help the company to diversify
the purchasing portfolio and attract more customers even when their sales become saturated.iii
Pandora can overtake Diamond World primarily by offering products that Diamond World does
not offer- high quality jewellery made of precious metals that are sold at a more affordable price
point. Given Bangladesh’s lower-middle income country status, this offer will appeal to a large
number of people who otherwise would not purchase luxurious jewellery. Pandora can also
appeal to the consumers’ emotions. Pandora’s ability to customize some of the jewellery to each
individual’s taste can give an advantage over other jewellery retailers as this allows customers to
tie their emotions to their purchase. Pandora can also overtake other jewellery retailers in
Bangladesh by offering a range of modern designs compared to the traditional designs that other
retailers sell. This unique aspect of the products is bound to attract more clients as people often
look for more light weight jewellery that is also elegant for everyday use or even for special
occasions.

Entry Strategy
Setting Up: To get started, we will become a Pandora franchisee and inaugurate a concept store
in Dhaka, Gulshan. Gulshan is the home to some of the most affluent residents of Dhaka and is
also a popular shopping destination to many non-residents of Gulshan as well, making it an ideal
location for Pandora. The massive population and higher average income of a resident of Dhaka
(compared to other parts of Bangladesh) will ensure a larger potential customer base for us.
The products will be imported into Bangladesh from Thailand, Pandora’s manufacturing site,
with the parent company’s guidance. The timing of our entry in the market will be on 1st January
which is a peak time for weddings to take place in Bangladesh. We will create recognition for the
brand and build a reputable image to capture a large market during the wedding season as people
buy a lot of jewellery during that time.

Financing: We plan on using a combination of two types of financing methods:

 The Franchisor: The business will partly be financed by the parent company of Pandora
by providing capital directly from the corporation.
Debt Financing

 Commercial Bank Loan: The franchise will also be partly financed by one of the most
common methods of financing a business- a commercial bank loan i.e a term loan.

 Loans from Individuals: We will borrow from high net worth individuals to finance the
rest of the business.

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Government Restrictions/Facilities: There are no specific laws in Bangladesh related to
franchisingiv and 80% of Bangladesh’s demand for gold is met with smuggled gold. However,
import tariff on precious metals/gems are as follows:

 Tk. 6,000 per carat of diamond

 Tk. 2,000 per 11.664g of gold
 Tk. 50 per 11.664g of silverv
Most of Pandora’s products are made of silver therefore import tariff can be expected to be
considerably low.
Some drawbacks of government policies include:
o Policy and regulations in Bangladesh are often not clear, consistent, or publicized.
o Corruption, administrative complexity, and non-transparency.
o Poor implementation of existing policies.
o Frequent change in government policies.
o Unfriendly/corrupt legal system

Method of International Business: We will use franchising as our method of international

business in Bangladesh. Reasons for that include:
o Pandora provides operational support, assistance on point of sale materials, marketing
materials and training employees to their franchiseesvi. The additional training from the
parent company on setting up the business and helping maintain product and service quality.

o Operating under Pandora’s brand name and standards allows a more smooth entry into the
market as Pandora is already internationally renowned and many potential customers have a
preconceived notion that they can expect quality products from the brand.

o It requires lower investment than other forms of international business that mandates
maintenance of brand image and quality.

o Lower risk of failure as they have a proven business model.

o Pandora offers “mystery shopping” which is when they send people to the concept stores
twice a year to evaluate the standard of service. This surprise check-in will encourage all
stakeholders of the franchise to strive for perfection consistently

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Marketing Plan
Target Demographic: Women and girls from middle to high income households, between the
ages of 17 to 60 years old
Products: Necklaces, earrings, rings, and charms made of precious metals, and bracelets made
of precious metals or leather. Some of the jewellery will be customizable with the options to
engrave something on the jewellery and include a small card for the customer themselves or the
person they are gifting it to.
Price: Ranging from affordable to expensive price points of DKK 150 to DKK 2,500 (2,020 taka
to 33,683 taka). The combination of premium and mid-premium pricing will attract more
customers.
Place: Dhaka, Gulshan is an ideal location for the store as some of the most affluent people of
Dhaka live in Gulshan and this demographic is more likely to be willing to pay premium prices
for our products. It is also a common place many residents and non-residents of Gulshan visit for
shopping.
Promotion: We will shoot an ad campaign and create social media pages for the Bangladeshi
outlet of the brand. This will help us spread the word about the new opening among all age
demographics through sponsored posts of the ad campaign on social media. The ad will put
emphasis on the fact that Pandora’s products are ideal to be bought as gifts, for yourself or for
special occasions like weddings or engagements. It will also highlight Pandora’s unique service
of customizing jewellery to fit each individual’s liking. The social media pages will mention the
location of the store for people to easily find the outlet and also the product portfolio for
potential buyers to get an idea about our products. To specifically reach a younger demographic
of people in their teens and 20s, we will invite social media content creators to attend the grand
opening of the outlet who will document the event and post about it on their social media
accounts for their large audience to see. This will create interest and curiosity among people who
see the posts and will likely be urged to visit the store themselves. The products, especially the
charm bracelets, will be marketed as a fashion statement and product of affordable luxury since it
is Pandora’s signature product and people often like to show off their luxury purchases. For other
forms of promotion, we will get Pandora featured on popular Bangladeshi newspapers like The
Daily Star and Prothom Alo.

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 Forecasted Income Statement
X

2021 2022 2023

Sales Tk. 43,800,000 Tk 47,032,440 Tk.50,503,434

Cost of goods sold (Tk. 13,140,000) (Tk.14,109,732 (Tk15,151,030)

)
Gross profit Tk. 30,660,000 Tk. 32,922,708 Tk. 35,352,404

Less: Wages, distribution and marketing expense (Tk. 17,520,000) (Tk.16,461,354 (Tk17,676,201)
)
Administrative expense (7,000,000) (Tk. 7,000,000) (Tk7,000,000)

Operating Profit Tk.6,140,000 Tk. 9,461,354 Tk. 10,676,203

Interest income 0 0 0

Interest expense (Tk. 6,500,000) (Tk. 6,500,000) (Tk. 6,500,000)

Profit before tax (Tk. 360,000) Tk. 2,961,354 Tk.4,176,203

Income tax expense 0 (Tk. 148,067.7) (Tk 208,810.15)

(5%)
Net income for the year (Tk. 360,000) Tk.2,813,286.3 Tk.3,967,392.85

General Assumptions

 Cost of goods sold is consistently 30% the value of sales revenue. This assumption is
based on Pandora’s income statement of 2019 as it stated the cost of goods sold was
approximately 30% of the sales revenue.
 Growth rate in sales is assumed to be a constant 7.38% as the average growth in sales in
the past 4 years for Pandora has been 7.38%.
 Administrative expense is assumed to be constant at Tk.7,000,000 in all three years.
 Interest income is assumed to be 0 as we will not be giving out loans or making any
investments in the first three years.

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  Interest expense is assumed to be constant at Tk. 6,500,000 for all three years due to
loans taken out to finance the business.
 Income Tax is assumed to be 5%

Assumptions for 2021

 We assumed to have 40 sales per day on average and each sold product was worth
Tk.4,000 on average, making the sales revenue Tk. 43,800,000 in 2021.
 Operating expenses was assumed to be 40% the value of sales revenue as it is on
Pandora’s published income statement for 2019.

Assumptions for 2022

 There is a 7.38% growth in sales revenue from 2021 to 2022.

 Operating expenses are assumed to be 35% of the value of sales revenue as marketing
expenses are expected to decrease after the first year of business.

Assumptions for 2023

 7.38% growth in sales revenue is assumed from 2022 to 2023.

 Operating expenses remains at 35% the value of sales revenue.

Forecasted Balance Sheet

2021 2022 2023
Assets
Current Assets
Cash Tk. 3,500,000 Tk.3,000,000 Tk.1,000,000
Inventory Tk. 10,600,000 Tk.9,500,000 Tk.6,170,362.1

Fixed Assets
Computers Tk. 60,000 Tk. 51,000 Tk. 43,350
Furniture Tk. 90,000 Tk. 76,500 Tk. 65,025
Less: Accumulated (Tk.22,500) (Tk. 19,125) (Tk. 16,256.25)
Depreciation (15%)

Total Assets Tk. 14,227,500 Tk. 12,608,375 Tk. 7,262,480.85

Liabilities
Long Term Liabilities
Interest Payable Tk. 14,587,500 Tk. 9,795,088.7 Tk. 3,295,088

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Owner’s Equity
Owner’s Capital (Tk. 360,000) Tk. 2,813,286.3 Tk.3,967,392.85

Total Liabilities and Tk. 14,227,500 Tk. 12,608,375 Tk. 7,262,480.85

Owner’s Equity

Assumptions

 Depreciation on Fixed Assets is straight-line depreciation of 15% annually based on

approximate average depreciation on Pandora’s balance sheets from the past 4 years.
 After paying Tk. 6,500,000 in interest expense in 2021, we took an additional loan of
Tk.1,707,588.7 in 2022. Therefore after paying interest expenses in 2021, total interest
payable in 2022 stands at Tk. 9,795,088.7.

Diamon         2023
d
World’s
Forecas
ted
Income
stateme
ntX 
Sales   Tk. 60,604,120
Cost of goods sold   (Tk.
18,181,236)
Gross profit   Tk. 42,422,884
Less: Wages, distribution and marketing expense (Tk.
15,151,030)
Administrative expense   (Tk. 7,000,000)
Operating Profit   Tk. 20,271,854
Interest income   0
Interest expense   (Tk. 1,000,000)
Profit before tax   Tk.19,271,854

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Income tax expense (5%)   Tk. 963,592.7
Net profit for the year       Tk.
18,308,261.3

We have assumed the sales value of Diamond World to be 20% higher than Pandora for the
year 2023. It is higher as diamond world has several outlets and sells more expensive
products and it is only 20% higher due to the products being very expensive, therefore the
number of sales is assumed to be low. Diamond World’s jewelry’s price range is between
Tk.20,000 to Tk.100,000 which is why they have a smaller target demographic and hence
fewer clients.

Value of cost of goods sold is different for Diamond World and Pandora, however, cost of
goods sold is assumed to be 30% the value of sales for both companies. This is based on
Pandora’s original income statement on their website where it mentions the cost of goods
sold to be approximately 30% of that of sales revenue.

Operating expenses like wages, distribution and marketing expenses for Diamond World is
considered to be 25% of the value of sales as compared to 35-40% for Pandora, as their
marketing expenses are assumed to be very low in comparison to Pandora. This assumption
is based on their lack of their lack marketing efforts and therefore lack of market presence,
especially compared to their competitors.

Interest expense for Diamond World is assumed to be much lower than that of Pandora as it
is an already established business and probably does not have a large amount of accounts
payable on loans compared to a new business like Pandora.

Diamond World’s net income is significantly higher than Pandora’s in 2023 mainly due to
the fact that they have several outlets across the country and therefore higher sales value plus
lower operating and non-operating expenses. A contributing factor to all these reasons is that
Diamond World is already an established business and therefore no longer incurs the extra
costs of running a newly opened business.

Transferring Remittance

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Conditions Net Profit in Taka Remittance to be received
by parent company
1 DKK = Tk. 13.48635855 Tk. 3,210,339.575 238,043.4691DKK
(Exchange rate of 15th August,
2020)
Danish Krone (DKK) Tk. 3,210,339.575 214,239.1222 DKK
appreciates by 10%
Danish Krone (DKK) Tk. 3,210,339.575 273,749.9895 DKK
depreciates by 15%

Net income made by Pandora in 2021-23(in Taka)

= -Tk.360,000 + Tk.2,813,286.3 +Tk.3,967,392.85 = Tk. 6,420,679.15

Exchange rate of 15th August, 2020 was Tk. 1 = 0.074149 DKK

Tk. 6,420,679.15 / 2 = Tk. 3,210,339.575 = 238,043.4691DKK

Remittance to be sent on 1st January, 2024 (half net profit of 3 years) = 238,043.4691DKK

If DKK appreciates by 10%, Tk. 1 = 0.074149 DKK x (0.9) = 0.0667341 DKK

Remittance to be sent if DKK appreciates by 10% = 3,210,339.575 x 0.0667341 DKK

= 214,239.1222 DKK

If DKK depreciates by 15%, Tk 1 = 0.074149 DKK x (1.15) = 0.08527135 DKK

Remittance to be sent if DKK depreciates by 15% = 3,210,339.575 x 0.08527135 DKK

= 273,749.9895 DKK

Reducing Loss Due to Exchange Rate Fluctuation

We assume that we can only hedge the net profits till 2022 as the net profit of 2021 was
negative and that of 2023 is acquired at the end of the year and on 1st January, 2024 we will
remit 50% of our net profit of 3 years. Ways we can hedge against unfavourable exchange
rate fluctuation include:

 Investing in stocks to generate a return that might completely or partially offset

exchange rate risk in 2024 (in case Taka depreciates against the Danish Krone)

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  Converting cash into gold if we expect price of gold to rise later. This way we can sell
the gold at a higher price as an attempt to hedge against depreciation of Taka in the
future.
 Create a fixed deposit for 1 year which can yield up to 6% interest at the moment.
 Investing in a treasury bill up to 1 year of maturity.

Conclusion
The market for precious metals jewelry in Bangladesh is considerably large given Bangladeshis
buy it as a fashion statement, to keep as an asset or in large quantities for occasions like
weddings. In the age of competition, people are always looking for a better deal which is exactly
what Pandora can provide with their more affordable prices. After a thorough analysis, we have
concluded that it is a profitable business idea to start a Pandora franchise in Bangladesh.

Pandora is already a well-established brand and with the parent company’s assistance and set
standards, the franchise is likely to be consistent and grow over the years. The product quality
will remain unchanged as the parent company handles manufacturing, therefore clients will
enjoy quality products at an affordable price. The investment is considerably high in the initial
years but we can gradually build a large customer base, increase sales revenue and also net
profits. The franchise can overtake its competitors by offering more modern designs and allow
clients to make more personalized jewelry, which no other precious metals jewelry retailer offers
in Bangladesh plus creating a reputation for reliability in aspects of quality. We consider the
franchise to be sustainable as it has great potential to grow in the future years and generate
bigger profits.

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References

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i
Diamond World. (2016). About Us. Retrieved from: https://www.diamondworldltd.com/about-us/

ii
CityLife. (2014). Pandora: A Charmed Success. Retrieved from: http://hkcitylife.com/index.php?
route=product/product&path=105_269_270&product_id=1276

iii
Almirao, F. (2015, December 11). PANDORA WINNING MODEL. Retrieved from: https://digital.hbs.edu/platform-
rctom/submission/pandora-winning-model/

iv
Entrepreneur-sme.asia. (n.d.). Bangladesh Franchise Association. Retrieved from: https://entrepreneur-
sme.asia/franchising/asia/bangladesh-franchise-association/

v
Dhaka Tribune. (2019, June 13). Gold import cost to come down. Retrieved from:
https://www.dhakatribune.com/business/economy/2019/06/13/gold-import-cost-to-come-down

vi
Pandora. (n.d.). Pandora Franchise Information. Retrieved from: https://us.pandora.net/en/explore-the-
brand/franchise.html