Business Simulation Game Analyzing Heritage Tavern Company - Coursework Example

 Business Simulation a) Presentation of the objectives and strategy of the company: Our newly formed company is “Heritage Tavern”. Heritage Tavern will own and operate heritage bed & breakfast hotels in major historical cities of Europe. In the first phase two hotels will be opened. The first one will be in London; the second one will be in Switzerland. The hotels will be housed in properties that are at least more than a century old. The main objectives of our company, “Heritage Tavern” will be: 1) To successfully start and operate the first two properties that will come up in Switzerland and London. 2) To create maximum satisfaction for our customers. 3) To achieve cost leadership in our segment. The first two properties will come up in Westminster in London and Estavayer-le-lac in Fribourg, Switzerland. The first objective of the company is to successfully commence the operations of the two hotels. The second objective is to maximize the satisfaction of our guests. We can sustain our company in the long run, only by maximizing the satisfaction of our customers. We intend to achieve cost leadership in our segment. Our competitors include other budget hotels and bed & breakfast places. By achieving the lowest costs of operations we will be able to pass some of the costs savings to our customers in the form of lower prices. Also we will be able to operate at higher margins than our competitors. Strategies for achieving the objectives: The main strategies for achieving the objectives of the company are: a. To choose those properties that are at least more than 100 years old. b. The properties should be strategically located in areas of historical importance. c. The customer satisfaction will be maximized by providing them with the highest quality of service; the best heritage ambiance and maximum value for their money by charging affordable prices. d. The chefs and housemaids that will be employed will be those who have at least a year of experience in the hospitality industry. e. Every hotel of the company will have two managers. The managers will be responsible for the day-to-day operations of the hotels. f. The cost leadership will be achieved by having tight cost control at every stage of the supply chain and operations management. Situational Analysis: The company has already identified two properties in London and Switzerland for starting the hotels. The properties have been taken on lease. SWOT analysis of our company: Strengths: The promoters of the company are extremely competent. They will also be responsible for strategy formulation and their implementation. The company will have zero debt in its balance sheet. Weaknesses: The Company has no previous experience in managing such ventures. The shareholders also have no experience in managing hotel chains. Opportunities: There are immense opportunities as tourism in Europe picks up. The 2012 London Olympic Games will give further boost to tourism. Threats: The threat comes from the intense competition in the hospitality industry. The hospitality sector is also very vulnerable to economic and business cycles, terrorist attacks and other global political and social factors. b) Business plan: 1. Organization……..5 2. Sales & Marketing…….8 3. Operations……………….10 4. Finance……………..12 1. Organization: Company Profile (Legal) The company will operate an international chain of heritage bed & breakfast hotels in historical cities of Europe. These bed & breakfast hotels will be housed in buildings which are more than a century old. The company has been registered as a limited liability corporation under the name of “Heritage Tavern.” Mission statement of the company: The mission statement of our company is: To give an unmatched heritage experience to our guests at extremely affordable prices. Vision statement of the company: The vision statement of the company is: To create value for our shareholders and stakeholders by achieving product leadership and cost leadership in our category. Business Owner: The two promoters of the company will also be the Managing Directors and Chief Executive Officers ( CEOs) of the company. They will hold 30% equity of “Heritage Tavern”. The remaining 70% of the equity will be held by a Switzerland based venture capital fund that will provide the seed capital ( initial investment of $ 150,000.) Location: The first “Heritage Tavern” property will begin its operations in the city of London by the end of this month. This property is located in the historical Westminster Area of Central London. The second “Heritage Tavern” property will be located in Estavayer- le-lac, Switzerland. Estavayer –le-lac is a historical castle town in the canton of Fribourg in Switzerland. Premises: The hotels will be housed in properties that are at least more than a century old. Other costs & Jobs: The rooms will be priced at $ 175 per night. These will be exclusive of taxes. This will also include the costs of complimentary breakfasts. The London property of the company will have 40 rooms. The Switzerland property will have 30. Each of these rooms will be double-bed rooms. Every room will have a television, attached bath-room and toilet. Both the properties will have access to wi-fi facilities. The décor of the rooms will be in sync with the heritage architecture of the property. There will be a kitchen in each hotel that will prepare and serve the breakfasts that will be complimentary. The guests will have the choice to choose from continental, American or English breakfasts. The hotels will not have restaurants nor will they serve any other meals except the morning breakfasts. In this sense the hotels will be strictly, “bed & breakfast”. The guests of the hotel will get all other facilities during their stay that they get in a full service hotel. Resources: Every hotel will have two managers. These managers will be responsible for twelve hour shifts each. The kitchen staff will be composed of three chefs for each property. The London property will employ ten housemaids to serve the guests. The Switzerland property will have eight housemaids. The total number of permanent staff in the London hotel: two managers + three chefs + ten housemaids. = 15 The total number of permanent staff in the Switzerland Hotel: two managers + three chefs + eight housemaids = 13. Management: The two promoters will act as Chief Executive Officers and Managing Directors of the company. One of the managing directors will oversee the London operations while the other one will oversee the Swiss operations. Every hotel will have two managers. These managers will be responsible for twelve hour shifts each. Training & Recruitment: The London property will employ ten housemaids to serve the guests. The Switzerland property will have eight housemaids. The total number of permanent staff in the London hotel: two managers + three chefs + ten housemaids. = 15 The total number of permanent staff in the Switzerland Hotel: two managers + three chefs + eight housemaids = 13. The housekeeping staff will be recruited from those who have experience in the industry as well as from novices. The staff will be given a training of a week on the properties of the hotels themselves. 2. Sales & Marketing: Market Research: Why is it an opportune time for starting the breakfast chain? Globalization has given a new boost to international tourism. This tourism boom is being propelled by the growing number of international tourists from emerging markets like China, India and Brazil. The recent financial crisis was also not able to completely reverse the rising trend of international tourists. Europe continues to be the number one destination for tourists from all over the globe. The 2012 Olympic Games will be held in the city of London. This makes it the right place for beginning the operations of the company. The Olympic Games will give a further boost to tourism in Europe. Marketing strategy of the company: The company’s website www.heritagetavern.com is already in the process of design. Customers can check about the properties and make online bookings through the website. The marketing strategy is to create a positive word-of-mouth by creating maximum satisfaction among customers. We will also tie-up with major travel agents who arrange packaged tours. Competition: Our competitors include other budget hotels and bed & breakfast places. Target Segment: Our target segment is international budget tourists, especially those belonging to the middle class of emerging countries like Brazil, China and India. These tourists are highly value conscious. They cannot afford to stay in European luxury hotels. The market of budget tourists coming from emerging countries is expected to explode during the next ten years. Pricing: The rooms will be priced at $ 175 per night. These will be exclusive of taxes. This will also include the costs of complimentary breakfasts 3. Operations: Product design: The hotels will be housed in properties that are at least more than a century old. The London property of the company will have 40 rooms. The Switzerland property will have 30. Each of these rooms will be double-bed rooms. Every room will have a television, attached bath-room and toilet. Both the properties will have access to wi-fi facilities. The décor of the rooms will be in sync with the heritage architecture of the property. There will be a kitchen in each hotel that will prepare and serve the breakfasts that will be complimentary. The guests will have the choice to choose from continental, American or English breakfasts. ‘The Heritage Tavern’ bed & breakfast hotels will give an unmatched heritage experience to our guests at extremely affordable prices. Purchasing: The purchasing will be mainly done for the raw materials that will be used in the preparation of the breakfasts. Ingredients of good quality will be used in this so as to give the customers great value for their money. Service management: The London property will employ ten housemaids to serve the guests. The Switzerland property will have eight housemaids. Every hotel will have two managers. These managers will be responsible for twelve hour shifts each. This staff will be suitably trained to give the best possible experience to the customers. Quality: Quality will be maintained in every aspect of the operations of the hotels. The strategy of our company is to become a product and quality leader in our segment and to gain a sustainable competitive advantage through this quality leadership. Operational objectives of the company: The objectives of the company during the first six months are: 1) To maintain average room occupancy rates of more than 75% in both the hotels. 2) To achieve cost leadership in its category. 3) To create maximum value for all its stakeholders. The main stakeholders are the shareholders, employees, suppliers, customers, state and the community. 4) To have a property in all the major cities of historical importance in Europe during the next ten years. We intend to open our third property in Venice, Italy. 4. Finance: Forecasted profit & loss and cash flow statement for the first six months: Projected profit & loss statement of " Heritage Tavern" for the first six months Sales 1653750 Rent 100000 salaries of the managers 104,400 salaries of the chefs 200,000 salaries of the house maids 300,000 food 378,000 Electricity and other miscellaneous expenses 200,000 Profit before taxes 371,350 Taxation ( at 30%) 111,405 Profit after taxes 259945 The sales of $ 3307500 have been calculated, assuming 75% room occupancy during the first six months: .75* 70* $ 175 * 180 = $ 1653750 Salary of manager for the Swiss property: $ 5500 per month per manager. Salary of the manager for the London property: $ 2716 per month per manager. Average salary of chefs: $ 5555.5 per chef per month. Average salary of the housemaid: $ 2777.77 per month. The two properties have been taken on a lease of 10 years. The lease has the embedded option of buying the property at the expiry of the lease at the fair market value then. The annual lease rent of the Swiss property: $ 120000 The annual lease rent of the London property: $ 80000 Therefore lease rent for six months on the Swiss property: $ 60000 Lease rent for six months on the London property: $ 40000 Total lease rent for six months: $ 100000 Initial investment made in the company: $ 150,000 (12 million dollars). $ 100,000 of this initial investment will be paid as lease rents for the first six months. The remaining $ 50,000 will be spent on making the properties operational. The profit after taxes during the first six months: $ 259,945. Assuming the same profitability, the profit after the first year of operations will be: 259,945 * 2 = $ 519,890. Return on equity of the company after the first six months of operations: 259,945/ 150,000 = 173 %. Projected Balance sheet for the first six months: Balance sheet of Heritage Tavern at the end of six months I. Sources of funds a. share capital 150,000 II.Application of funds a.Fixed assets ( equivalent to the lease rents) 100,000 b.Miscellaneous expenditures l 50,000 Total 150,000 The above assumptions are based on very conservative estimates of 75% average room occupancy. There is every possibility that the actual room occupancy rates will be higher than 75%. The main financial objectives during the first six months will be: 1) To maximize the wealth of our shareholders. 2) To continuously improve various measures of profitability like net profit margin, return on equity etc. Raising money (selling of equity): The initial investment of $ 150,000 will be provided by a venture capital fund. In return the venture capital will hold 70% of the equity of the company. The remaining 30% of the equity will be held by the three promoters who will also be responsible for the management of the company. Orders: 9450 rooms occupied during the first six months Sales: $1653750 Profit/ Loss: $ 259,945 Bank balance:- Income: $ 259,945 Efficiency or room occupancy:75% References: Eric S. Siegel, Brian R. Ford, Jay M. Bornstein .The Ernst & Young Business Plan Guide .New York: John Wiley and Sons, 1993. Print. Read More