revenue and cost

Mention 5 drivers/ activities that drives Revenue:

Payment from customers

Mention 5 drivers/ activities that drives Cost of goods sold:

Advertising, size of clothes, complexity of design, price of raw material, delivery (distance), currency fluctuation and economical situation, growing of the company (more employees, more salary and fixed cost)

Mention 5 drivers/ activities that drives Capacity costs (fixed cost):

Employees, raw materials, packing, rentals and services, delivery

Rent of facilities, maintenance of machinery and purchase, electricity, gas, installations, waste disposal, informatics cost, computers, place, water,

Mention 5 drivers/ activities that drives Operational capital:

Delivery /money need to pay to sending clothes, manufacture cost

Mention 5 drivers/ activities that drives Investments:

Number of customers, marketing campaigns, delivery cost (cooperate with existing delivering company/ our own delivery department), expansion of market (machinery, installations, server webpage), more employees, more space/ workshops, bigger capacity of internet server

mention 5 conditions that would be part of your budget process:

Price of material (fashion for different material), currency rate, economical situation, different pricing depending on current trends, competitors (e.g., on sale), EU program

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business model

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Market Forces

Market Issues: (+)

  • Ÿ   Which shifts are underway?

The trend of online shopping

  • Ÿ   Where is the market heading?

Due to the convenience of the Internet, people are getting used to shop online, therefore the market is heading from niche market to mass market.

Market Segments: (+)

  • Ÿ   What are the most important customer segments?

Our company will focus on two groups: young people or designers and non-standard size people. 

  • Ÿ   Which peripheral segment deserves attention?

People who like online shopping


Needs and Demands: (+)

  • Ÿ   Where are the biggest unsatisfied customer needs?

We create a platform for people who have dreams to be a designer and who want to be unique but have no opportunity to realize their goals due to limited resource and budget.

Second, we perceived that people who live in Northern Europe are physically bigger. Big size people normally have a hard time purchasing clothes and sometimes it’s an embarrassment to try on the clothes in public while they go shopping in traditional stores. Our company find out there is a promising business by solving the problems for this group.

Revenue Attractiveness: (?)

  • Ÿ   What are customer really willing to pay for?

Customized product, co-creation product, and well after sale service.

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Industry forces

Competitors (+)

-Who are our competitors?

Related clothes shops, e.g., H&M, ZARA, ASOS, Bonpirx, thredless

-What is their cost structure?

Fixed costs:

raw materials, packing, delivery costs, computers, salaries for employees, rents for shops, manufacturing facilities, waste disposal, electricity, gas, etc.

Variable costs:

quantity of producing clothes, advertising costs, currency fluctuation & economical situation,

Substitute Products(+)

-Which products or services could replace ours?

Products: Regular sizes of clothes, accessories,

Services: asking questions in persons and reply directly, receiving the product immediately,

Suppliers & Other Value Chain(?)

-Who are the key players in our value chain?

designers who design clothes

customers who co-create clothes with designers

suppliers who provide raw materials


-To what extend does our business model depend on other players?

In addition to key players mentioned above, business model might depend on delivery, magazine, and blog companies that our channels belong to, though it’s not the crucial players, S&W cannot communicate or distribute with customers without them.


-Which stakeholders might influence our business model?

The ones who influence our cost structure, channels, key resources, and key partners

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Macroeconomic forces

1) Global market economical dondition:

–  economy is in medium conditions, boom in several industries / fashion is always on the top

– unemployment rate in Lodz February 2011 = 13,2% / 9,7% in whole Poland

2) Capital markets:

–          State of capital market: medium / in times of global crisis country was doing very well but still country budget gap is increasing

–          Type of funding à KEY TRENDS

3)      Commodities & other resources:

–          Obtaining resources: headquarter in Lodz, former manufacturing city aspiring for polish fashion capital, easy to obtain skilled cheap labour

–          Other resources: rising oil prices, low labour costs compared to other European countries, skilled labour

4)      Economic infrastructure:

–          Public infrastructure: still under construction / faster pace of building highways before Euro 2012

Individual & corporate taxes–> brief:

22% basic rate / 3% services & unprocessed goods / 0% export / PIT Personal Income Tax 18% & 32% progressive / 19% CIT Corporate Income Tax / Tax on civil law transactions 1% and 2% / Real estate taxes (annual tax rate from square meter Residential buildings around 1,2DKK and commercial buildings around 40DKK)

Types of taxes

  • Corporate Income Tax (CIT)
  • VAT (Tax on Goods and Services)
  • Excise Duty
  • Tax on Dividends
  • Personal Income Tax (PIT)
  • Inheritance and Gifts Tax
  • Tax on civil law transactions

–        Real estate tax

–        Agricultural tax

–        Forestry tax

–        Tax on transportation means

–        Tax on dogs

–        Games tax


Fiscal structure in Poland

2006 VAT Excise duty PIT CIT Games tax Other fiscal income
% of total fiscal income 42.7% 21.3% 14.2% 9.8% 0.5% 11.5 %

 CIT    Corporate Income Tax

-Act on Corporate Income Tax – 15 February 1992
(Journal of Laws No. 21, item 86 as amended)


•   all legal persons and organisational units having the same rights, except partnerships

choice between PIT and CIT

•   E.g. limited partnership

•   e.g. limited joint-stock partnership

–  Does not apply to certain branches of activity

–  In 2006, 2007, 2008 and 2009 the rate

•   19 %

Base of taxation: profit taken as surplus of income over cost

–  Losses can be carried forward up to 5years, though no more than 50 % of loss can be written off in any year.


VAT    Value Added Tax

–  Tax on Goods and Services Act 11 March 2004
(Journal of Laws No. 54 item 535)

–  Introduced in Poland in July 1993

–  Companies and individuals must register for and charge VAT if their annual turnover exceeds the Polish equivalent of EUR 10 000

–  refundable to foreign tourists leaving Poland (i.e. other than UE)

Rates of taxes

–  basic rate: 22 % à standard rate

–  preferential rate

  • cereals, vegetables, meat, fish, bread, medical products, fire-fighting equipment : 7 %
  • unprocessed products, taxi services (only when charged in bulk): 3 %

–  0% rate applicable to exports  

Legal framework

•    the VAT Directive 2006/112/EC of 28 November 2006 (Official Journal L 347, 11.12.2006, p.1)

•    application of VAT rates in Member States

The basic rules

•   standard rate of at least 15%

•   one or two reduced rates of not less than 5% may be applied by States (enumerated in a restricted list)


Excise duty

–  some commodities in Poland are subject to excise duty

–  not present in all legal systems

•        E.g. does not exist in France

n  rate depends on the kind of goods, as well as on the origin of the good

Approx. 200 products:

–  fire-arms,

–  fuels and lubricants,

–  plastic packaging,

–  salt,

–  alcoholic beverages,

–  tobacco products,

–  certain consumer goods (hi-fi equipment, video cameras, yachts and motor boats, perfumes, etc.)- „luxury products”

Tax on dividence

–  applies to legal and natural persons who are shareholders in companies

–  The tax rate equals 19 % unless agreements on avoiding double taxation state otherwise

PIT    Personal Income Tax

–  Act on Personal Income Tax 26 July 1991 (Journal of Laws No. 80 item 350 as amended)

–  specifies about 100 types of income exempt (reduced each year)

– On the income of individuals, independently of the source of origin

– Having lived in the country for over 183 days in a calendar year the overall income is taxed (not for foreigners who represent a foreign company in Poland or work for a corporation established with foreign capital)

-Otherwise only Polish earnings are taxable

– Paid on a monthly basis and the deadline for yearly tax returns is April 30

 PIT IN 2009 and 2010

Tax Base (PLN)  Income Tax 
up to 3091 EXEMPT
up to 85 528 18 %  556.02 
over 85 528 14 839.02 + 32 % 

 Tax on civil law transactions

–  Tax on Civil Law Transactions Act – 9 September 2000 (Journal of Laws No. 86 item 959)

–  A taxpayer who must pay this tax, without being called to do so by tax authorities, is obliged to submit the relevant declaration, calculate and pay the tax to the tax office or transfer it to its bank account, within
14 days from the date of the commencement of tax obligation

–  E.g :

•        1. Sales contract:

a) connected with real estate: 2%

b) other rights: 1%

•        2. exchange contract, donation,…:

a) connected with real estate:  2%

b) other rights: 1%

•        3. contract of lease: 2%


Stamp duty

–  Act on Stamp Duty of 16 November 2006 (Journal of Laws No. 225, item 1635)

–  The following are subject to stamp duty (opłata skarbowa):

•        performance of an official activity on the basis of a declaration or application;

•        issuance of a certificate (on the basis of an application)

•        issuance of a licence (permit or concession)

•        submission of a document affirming the granting of a power of attorney

•        performance of an official activity, issuance of a certificate or a licence (permit or concession)

–  Paid:

–     Cash payment at the administrative body’s cashdesk, a bank transfer to the relevant tax body’s account or by means of encashment (inkaso)


Local taxes

–  Local authorities are empowered to set the level of rates and the scope of relieves in local taxes.

–  Their rates, however, cannot exceed the maximum levels determined by the Parliament.

–  Local taxes and fees include: real estate tax, vehicle tax, dog tax, and market tax.

Real estate tax

–  Annual tax rates are determined by resolutions of the local government of communal level (gmina) and may be different in each administrative area (within the limits defined by the Minister of Finance published every year)

–  Plans to replace this tax with a cadaster tax, which will be related to the property’s value

–  Maximum rates for real estate property are set out in the following table (2008):

Type of Real Estate Annual Tax Rate / Square Meter
Residential buildings 0.59 PLN
Commercial buildings 19.01 PLN

Double taxation treaties

–  model OECD convention

–  Since Poland has signed agreements on avoiding double taxation with approx. 60 countries

–  reciprocity principle

–  reduce or eliminate various taxes

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Key trends

1)      Technology trends:

Technology trends: mass production in Asian countries

Emerging technologies: upcoming 3D printers age, they will be able to print out clothes

2) Regulatory trends:

In Poland as a domestic country where headquarter is placed rules concerning setting up a company are easier than few years ago à all procedures done in one ‘window’ / average 2-3day registration time, max 14days / costs around  600DKK

Starting business- steps

-local authorities – City Hall: entering the register of economic activity and applying to obtain  company’s fiscal identification number (NIP)

– Bank: open a bank account to enable money transfers (compulsory for the Tax Office) – when the new bank account number is available or changed, the entrepreneur has 14 days to inform the Tax Office about this. It is necessary for ransfering money via banks when dealing with the Tax Office and in transactions with other entrepreneurs.

– Tax Office: decision and application about being a                VAT payer or not, declaration on the type of income tax to be paid if this applies to certain activities

– Informing Social Security Office (ZUS) as social security for the owner or employees is compulsory

-Ensuring that all laws and regulations are applied concerning the place where the business will be run (depending on the activity: fire security, work security)

-Obtain a permit from the Environmental Authority if the business will interfere in any way with the environment (pollutants, noise, or other emissions)

-Sanitary rules and regulations have to be met when any aspect concerns comestible products

– Informing the National Labour Inspection  (PIP)

-Informing the Fire Department

National EU subsidiaries: Programme for Poland 2007-2013

Aims of the structural policy for the period 2007-2013:

-convergence (in other words cohesion) is supporting the infrastructural development and economical potential in most pour regions. It consumes almost 82% of the whole structural spending.

-increasing the regional competitiveness and employment which means supporting innovation, science and professional trainings in less developed regions (almost 16% of all spending).
-European territorial cooperation meaning giving support, promoting and realizing international projects.

Operational Programme – Human Capital
The Human Capital Operational Programme is financed from the European Social Fund and focuses on supporting: employment, social inclusion and high quality of tertiary education. Also, creating an efficient public administration and good governance, providing technical assistance, health promotion in the human resources and development of human resources in rural areas as well as adaptability of workers and enterprises. All these goals  are divided into two components- central and regional which helps keeping the system consistent.

Operational Programme – Innovative Economy
It is a programme financed from the European Regional Development Fund which concentrates on: increasing the innovativeness of enterprises, dynamising the entrepreneurship potential, developing new technologies, enhancing the competitiveness of Polish science and economy and creating better jobs.

European Territorial Co-operation
The European Territorial Co-operation consists of 3 types of programmes: cross-border, transnational and international co-operation programme which can award funds to a wide range of projects. All the names has already been mention in the topic concerning the changes  in the operational programmes for the period 2007-2013.. The idea is to implement variety of common local and regional initiatives (in subjects of economy, education, development and many more) in the partnership with investors from defined country or region which would bring profits to both Poland, as well as to the other country.
Transnational co-operation appears in The Baltic Sea Programme which apart from Poland is   participated by: Finland, Lithuania, Denmark, Estonia, Germany (only selected regions ), Sweden, Belarus (selected regions), Norway and the Russian Federation (selected regions).

Central Europe is another programme participated by: Austria, Slovakia, Slovenia, the Czech Republic, Germany (selected regions), Hungary, Italy (selected regions), Ukraine (selected regions).  International co-operation is represented by INTERREG IV C which covers 27 European Union countries, as well as Norway and Switzerland and should be participated by at least three countries including at least two partners from EU

Regional Operational Programmes
16 regional programmes, from which five are on the national level, were prepared in order to decentralize the programming of regional development and increase their effectiveness and competitiveness of individual regions. All ROPs are constructed similarly, but their contents and financial resources are specified at the regional levels. Subsidies can be assigned to the investments connected with health, education, development of cities and enterprises especially small and medium-sized, tourism and also building the informational society.

It should be stated that these investments have to be realized on the territory of voivodship that organized the financial support.

Local environment:

–          Lodz: economic Zone / decreased taxes for foreign companies

–          Lodz: capital city of fashion, designers’ competitions e.g. Golden Thread /  cooperation with European fashion industries like Milano fashion week

Local EU subsidiaries:

–          -woman +45

–          -decreasing  unemployment

–          -student initiatives

–          -innovative companies

3)      Social and cultural trends

Key social trends:  

–          Personal input into company gives employees satisfaction and make them more prone to engage into time consuming projects and give their best

–           Designer clothing orientation, people want to stand out from the crown so they will be willing to create their clothes according to own designs

–          Vintage / second hand orientation indicating willingness to create a unique clothing style which Stitch & Wear can provide now without need of going out from home (online shop)

Folk style still being on the top – we can provide appropriate materials and forms fitting current trend ( , )

–          Big sized people are intimidated to buy in shops, so they would prefer online sales

Shifts in cultural or societal values:

–          Popularity of online shopping

–          Big sized people are not intimidated any more to wear the same top fashion clothes as the rest of standard sized part of society

–          Change of customers taste (but we are constantly adjusting our designs catalogue to current needs)

–          Economical situation of customers (higher / lower incomes)

4)      Socioeconomic trends:

Key demographic trends:

–          Aging society (more old people)

–          Current 20-30 olds are vivid, have strong characters, want to underline their style and have more than 1 child. Current ‘dream family’ is going to have 2 or 3 children.

Spending pattern:

–          People are saving more due to economical crisis

–          Limited budget for clothing, there are more important things to save more for

–          Drawing conclusions from the spending patter our prices are going to be in the medium range, allowing people with limited budget to co-create with us special pieces of clothing in reasonable prices

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Tag line and logo

Tag line:

Being a clothes designer is not a dream anymore, it’s reality, your reality!

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What kind of people & technology do we need?

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– Flat chierarchy encoourages honest communication and direct ideas flow
– 10% of employees time free for own projects and activity connected with fashion and designing
– Free coffee and sweets, common lunch time encourages people to gather, talk and socialize (possibility of higher creativit)

– Innovative culture attracting fresh minds
– Cooperation with art schools and univeristies, scholarship, apprenticeships

– Innovative ideas awarded by premium salaries
– Team work also awarded

– Product champion responsib;e for culture
– Cross functional teams

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5 drivers / activities,which drive costs of goods sold

Consider if each of them is a fixed or a variable cost?

1) delivery cost = courier fees (variable cost- depending on size)
2) salaries of employees (fixed cost)
3) machines, their maintnence (fixed costs) and materials to produce clothes (variable costs)
4) workshop rental (fixed cost) or workshop purchase (fixed cost)
5) heating & power supply payments (variable cost)
5) advertising (fixed costs)

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