Launching an Enterprise - Research Proposal Example

Launching an Enterprise Table of Contents Table of Contents 2 Executive Summary 3 Market Review 5 Environmental Analysis 5 Industry Analysis 6 SWOT Analysis 7 Competitor Analysis 8 Marketing Strategy 10 Financial Analysis 10 Research Methodology 11 Data Analysis 14 Recommendation and Conclusion 15 References 16 Appendices 18 Executive Summary The project deals with the launch of a new catering business in Cardiff. The hypothetical company that has been chosen is Royal Catering Services. This is a private organization which will serve the families in Cardiff by providing them diversified country’s food. The company will be providing food services in restaurants, pubs etc. It will also provide food to the business clients and provide special services of home delivery to the customers directly during the weekends. The business mainly focuses on the fast food sector of the food industry. The company needs to take the following measures in order to avoid the challenges in future: Proper funding for the start up of the business implementing the correct marketing and promotional strategy. Employ experienced employees or staffs and teach them the curriculum related to the food service. Purchase the necessary food inventory that will be required to launch the business. Purchase additional equipments which will help to increase the future growth and also offer greater flexibility ultimately leading to expanded business services by the company. Mission The mission of Royal Catering Services is to provide healthy food and quality services at very reasonable prices. The company targets to achieve leadership in the domestic market by increasing the sales percentage in the food service market. It also has a target to lead the international market in the future years. Management Team The company has hired experienced business managers for the catering business in order to have an efficient management team. This team will examine the everyday operations of the employees and will make financial and non financial decisions required to bring in a good amount of revenue to the company. Market and Customers The target market that has been set by the company is Cardiff. The company has decided to provide catering services in different restaurants and pubs in Cardiff. However, the company will also provide services to the customers directly on weekends. This has been an additional feature added to attract the customers and achieve competitive advantage in the new market. Marketing and Sales The company should implement a marketing strategy which will help to earn a good amount of revenue to the company. Marketing and sales are closely related to each other. The company believes that by implementing an effective marketing strategy it will be able to have a remarkable sales figure which will help to lead the food service sector within next 5 years. Competition There are large numbers of players in the food services industry serving the same purpose. The company will have to face a tough competition in the beginning. The food service industry covers a huge area. It includes quick services (fast food), pubs, hotels, restaurants, staff catering etc. There are a large number of companies offering the aforementioned services to the customers. The company needs to plan its product and services strategy in a proper way in order to achieve success in the new market. The product and service offerings by the company should be diversified and well distinguished from the others. Business Operations Royal Catering Services will offer to its targeted customers a wide range of healthy and fresh food options. The menu will be revised regularly and modified according to the changes in customer choices in order to provide new food options to the customers so that they do not get bored by the same menu offered by the company. The company will be offering boxed lunches for serving the business clients. The reasonably priced and high quality food offered by Royal Catering Services will help to distinguish the company from its competitors in the market. Legal Entity Royal Catering Services is a tax exempted non profit organization aiming to provide high quality services to the restaurants as well as the customers in Cardiff. The company has initiated various programs to serve the purpose of providing additional service to the customers. Among them some of the remarkable programs are providing recovery programs related to the alcohol treatment of the young generation, cooking programs providing learning classes for preparation of various delicious menus etc. Organizational Structure The organizational structure of the company will be composed of CEO of the company, Vice Chairman of the company and 15 directors who will be performing their operations under the advice of the CEO of the company. Market Review Environmental Analysis An environmental scanning of the United Kingdom will help to understand the risk of the company related to the environmental factors. The PESTEL analysis helps to understand the risk related to the macro environment (Lorat, 2009). Factors Analysis Political The UK Government is taking necessary steps in order to strengthen its position associated with the food policies of the country. The Government Food Strategy aims at providing a secure food system for the people there. Thus the political environment of the country supports the businesses operating in the food service industry. Economic The economy of UK is the sixth largest in the world. The food industry of UK accounts for 15 percent of the entire manufacturing industry in the country. This industry generates an annual turnover of £72.8 billion and is ranked as the fourth largest industry of the world (Economy Watch, 2010). The food services industry, serving diversified food to the customers, constitutes a part of the food industry and is also supported by the economic environment of the country. Social The social factors include the pattern or the trend of demand based on the cultures, religion, nationality etc. of the customers residing in the country. Sometimes the people in the country prefer buying fresh, healthy and quality food from the restaurants or other food providers rather than preparing their own food in the kitchen regularly. The social environment of the country has a positive impact on the operations of the catering businesses. Technological The technological factors include the improvement and advancement in respect of technology employed in food services industry. The product innovation is obtained by implementing new technology. The food service industry provides variety of food to the customers by performing product innovation, Moreover advanced equipment are used to facilitate the preparation of quality and delicious food by the companies in the industry. Thus the technological environment of the country supports the food services industry. Environmental The major concern related to the environmental factor is the rise in the price of oil and coal leading to the rise in the price of the products of the food service companies. This might lead to deviation in the choice of the customers to buy alternative products at reasonable prices. The companies operating in this industry should take necessary steps to overcome the environmental issues. Legal Food standard agency sets the standards for the health of the people associated with the food industry in UK. These standards have been set for the health security of the customers. Thus the catering businesses following these standards and providing fresh and healthy food to the customers are supported by the legal framework of the country. Industry Analysis An industry analysis will be done with the help of Porter’s five forces to understand and analyze the threats that the hypothetical catering company faces from its competitors, suppliers, substitutes, buyers and new entrants (Porter, 1980; 1985). Rivalry from the existing firms- There are large number of companies offering a wide range of food services to the customers. Rivalry increases when a large number of companies compete by lowering the prices. The competition is lowest at the time when the companies compete on the other non price dimensions. The existence of numerous diverse competitors as well as minimal switching costs resulted in the strong rivalry between the existing companies. Moreover the strong financial performance of the companies in the recent years has intensified the rivalry. Thus rivalry in this industry has been assessed to be strong. Threat of new entrants- The threat of new entrants in an industry depends on two factors. One is the barriers to the new entry that are present in the food service industry. The other is the reaction that the new entrant can expect from the existing competitors in the industry. High capital requirement in order to finance the resources creates the barrier to entry. If the owners of the food service businesses are highly ambitious then they can expand their operations beyond a single company by means of franchising. This alternative option reduces the cost of the parent company and acts as an expansion route for the food service companies. The existence of switching costs also create barrier to the entry. In food service industry the supply or the raw food is mostly homogeneous between the suppliers. As a result the cost of switching is minimal thereby increasing the chances for the entry of new firms. Thus the threat of new entrants is high. Threat of substitutes- In a broader sense all the companies in the food service industry compete by producing various substitute products. In case of commercial food service industry the main threat from the substitutes is the integration of those customers who generally prepare own food. The opportunity cost of the time that is spent in the kitchen preparing home cooked food is much cheaper than that of having a particular meal in the restaurant. Another substitute can be the alternative leisure activities like going for movies or theatres. This can be an indirect substitute activity decided by the consumers rather than having a meal in restaurant. An increasing trend of the ‘on the go’ food has a negative impact on the food service sectors. Thus the threat from the substitutes is high. Bargaining power of buyers- Within a particular price range, the customer’s choice related to the food service provider is influenced by the taste and preferences and can change with time. As the food service is not very essential for the customers, thus the price elasticity of the demand is high. Moreover the consumers have the option of integrating backward by preparing their own food. However, the food service providers need high transaction volumes in order to earn good amount of profit. In this context the impact on the revenue of the business from a particular customer is small excepting for those companies whose business model is based on low volume but high margin sales. The bargaining power of the buyers as a whole is moderate. Bargaining power of suppliers- The foodservice sector involves low margin business. As a result it is very important to source good quality raw materials at comparatively low prices. There are risks related to the disruption in the supply chain of these businesses. There are few suppliers providing services to a wide range of companies. This implies that the pressure to these suppliers for maintaining low prices of their supply reduces. Thus the bargaining power of the suppliers is strong. SWOT Analysis A SWOT analysis helps to analyze the organizational issues (Mintzberg et al., 1998 and Ansoff, 1965). According to the researchers Dickson (2002), Glaister and Falshaw (1999), Valentin (2001) and Panagiotou (2003) SWOT analysis is one of the traditional methods of strategic planning. It helps in the decision making of the business after understanding the relationship between the company and its environment (Pahl and Richter, 2009; Ferrel and Hartline, 2010; Boone and Kurtz, 2011). The SWOT analysis will help to understand the organizational issues related to the catering or food service business. Strengths The business provides quality food to the customers, restaurants, pubs etc at reasonable prices. This is one of the biggest strength which will facilitate the hypothetical company in the future years. The business provides fast responses to the customers in cases of some immediate requirement. This business helps to develop strong links with different business clients, restaurants, pubs as well as other customers. These positive factors of the catering service business will help Royal Catering Services to achieve a successful position in the market. Weaknesses The business involves higher risk if there is some kind of failure in the business plan. The technical issues related to the business can be its weakness. Lack of expertise initially required for food specifications, lack of expertise for the menu development decisions etc. can have a negative impact on the business. Royal Catering Services should take necessary steps to avoid these issues. Opportunities This business has several opportunities. The business can provide services to various clubs like the woman club and then if there is scope for any upcoming event in those clubs then follow it to expand its operations. The business has the freedom to develop and implement changes in the services whenever required. If the business operations are extended to the emerging countries then it will lead to a remarkable growth of Royal Catering Services in the future years. Threats The political situation in the country where the business is operating may possess a threat. The intense rivalry among the catering companies in the food services industry is an area of concern for Royal Catering Services. It will be tough for the company to secure its position in the new market where there is already high competition among the existing companies. Competitor Analysis There are large numbers of companies providing food services to the customers in UK. The hypothetical company will have to face tough competition from these existing rivals in order to achieve success in the food service industry. Some of the big companies which might possess high threat to the hypothetical company are Dominos Pizza, Mc Donald’s, Pizza Hut, Pizza Express, The Restaurant Group etc. A chart showing the food service operators ranked on the basis of their banner sales in the year 2010 has been shown below: The size of the food service market in UK from the year 2006 to 2010 has been shown below: (Source: International Markets Bureau, 2011.) Marketing Strategy According to Culliton’s (1948), McCarthy (1964), Borden (1965), Nickels and Jolson (1976), Mindak and Fine (1981), Shapiro (1985), Kotler (1986) and Waterschoot and Bulte (1992) the marketing strategy is the combination of the company’s plans. The market strategy of Royal Catering Service will determine the combination of the company’s different plans. Product Royal Catering Services will offer to its targeted customers a high range of healthy and fresh food options. The menu will be revised regularly and modified according to the changes in the customer tastes and preferences in order to provide new food options to the customers so that they do not get bored by the same menu offered by the company. The reasonably priced and high quality food offered by Royal Catering Services will help to distinguish the company from its competitors in the market. Price The company should implement market penetration strategy as it is entering into the new market. It will provide services to the customers at reasonable prices. After the company achieves competitive advantage over its competitors in the new market, it can raise the prices of the products and services. Place The company should open its outlets near the main roads in Cardiff so that it can easily grab the attention of the common people. It should provide services to the reputed restaurants in Cardiff and the business clients. The company can open its outlet near the business centres also. Moreover it can provide additional services to the targeted customers on weekends by providing home delivery to them. Promotion The company can use online advertisement as an effective promotional strategy. This will help the company to convey its aim and objective to the customers without much effort. This will have a positive impact on the public image of the company. The company can also implement the strategy of sales promotion by providing discount on sales to the customers on specific occasions. This will help the company to increase the sales volume. Financial Analysis The launch of the new catering service business in Cardiff by Royal Catering Services requires budgeting or estimation of the fund requirements in order to start the business plan. The start-up requirements and the start up funding proposed for starting the business have been shown in Appendix 4 and 5. The company requires a total amount of £234.5 in order to launch the business and start the proposed activity. The annual turnover of the company for the year 2014 has been forecasted (Appendix 1). Presently the company is starting its funding operation with greater dependence on the equity capital (80 percent). If the company maintains this debt to equity ratio then it will help the company to maintain its financial strength. Increase in the percentage of debt capital utilisation can be risky for the business. A forecasted cash flow statement for the year 2014 has also been projected in Appendix 2. Research Methodology (Source: Saunders et al., 2009) According to Tobin and Joseph (2006) the research philosophy is the systematic procedure of collecting appropriate data, analysing the data collected and finally interpreting the result to define a particular research problem. The research philosophy consists of two types of approaches. Positivism (Positivist Style) Positivism research model follows the method of providing an establishing theory prior to the conduction of the research. There are two different procedures for conducting the research using positivist style. One method uses descriptive style for conducting the research (known as descriptive research method). The other one performs various experiments for finding solution to the research problem (known as experimental research method). It mainly focuses on the dependency or the relationship between the external variables and the internal variables. Interpretivism (Phenomenological Style) This methodology is mainly based on the perceptions of different individuals. Research scholars like Plummer (1983) and Spradley (1979) have stated that it does not use any statistical data for conducting the research. It helps in analysing the variables such as human emotions, their social motives, perceptions etc. The research model analyses the human behaviour using the qualitative data. Justification for choosing positivism The solution to the research problem will be obtained by conducting close ended surveys and the answers of the respondents will be taken into consideration to analyse the research problem and interpret the result. Research Approach Deductive Approach This model follows the step by step procedure of generating hypothesis based on the theory establishment in the literature reviews followed by the observations of the behaviour of the variables and ultimately reaching the conclusion. Inductive Research This research model at first observes the relationship between the variables followed by generating a hypothesis based on the observations and finally reaches to a conclusion. This model is just the opposite of deductive research model and converts observations into conclusions. Justification for choosing inductive approach The project deals with the launch of a catering business in Cardiff. Inductive research approach is the best suitable approach here. The observations from the close ended survey of the customers will help the company to reach to a conclusion and plan the marketing strategy accordingly and also verify that the proposed business plan is appropriate or requires some changes. Characteristics of the research The research has mainly analyzed the ontological dimensions such as the point of view of an individual related to the external as well as the internal factors of the food service industry. The responses of the individuals were different from one another and equal importance was given to each feedback collected from the respondents. This research has also analyzed the epistemological dimensions to verify that the suppliers are not being manipulated by the catering companies in the food service industry, the customers are not being cheated by providing lower quality food and finally that the prices of the products and services are affordable by the customers. Both the ontological and the epistemological dimensions are analysed based on subjective assumptions i.e. the personal feelings of the individual, their perception etc. Research Strategy The two types of research strategies are quantitative research strategy and qualitative research strategy. (Source: Family Health International, n.d.) Qualitative Research The qualitative research strategy is based on the culture, social behaviour, belief, human opinion etc (Boeree, 2012). This strategy has the ability to interpret the result of the research in a comprehensive manner. It does not take the statistical data into consideration while conducting the research (Regentsprep, 2012). Quantitative Research Quantitative methodology involves mainly statistical calculations and various computational techniques (Baxter and Jack, 2008; Alby, 2012). The objective of this project is to analyze the food services industry in UK. The analysis will be done by conducting a close ended survey. Sampling The researcher has used convenient sampling in order to determine the sample size. The sample size is 30. Data Analysis Questionnaire survey A set of 5 questions was prepared in order to conduct the close ended survey. These questions have helped to collect the feedback from the participants of the survey Analysis The responses of the participants in the close ended survey are categorised in the following segment (As shown in the table): Total Dissatisfied Satisfied Delighted 30 6 18 6 Contribution 20.00% 60.00% 20% The graphical presentation of the responses of the participants has been shown below: Thus the table shows that 60 percent of the customers were satisfied with the performance of the food service companies operating in the industry, 20 percent of the customers were dissatisfied and 20 percent of the customers were delighted because of the high quality delicious menus provided by these companies. Recommendation and Conclusion The food service industry is moving towards its growth stage and is performing well. From the close ended survey it has been analysed that the maximum customers are satisfied with the performance of the catering companies in the food services industry of UK. Royal Catering Services should aim at providing quality food and services to the restaurants, the business clients and other customers at reasonable prices in order to achieve competitive advantage in the new market. The pricing strategy and the promotional strategy the company are the important factors that should be taken into consideration in order to gain a successful position in the food services market. References Alby, F., 2012. Methods of collecting data: Interviews and questionnaires in practice. [pdf] Available at: [Accessed 04 April 2013]. Ansoff, H.I., 1965. Corporate Strategy. New York: McGraw-Hill. Baxter, P. and Jack, S., 2008. Qualitative Case Study Methodology: Study Design and Implementation for Novice Researchers. The Qualitative Report, 13 (4), pp. 544-559. Boeree, C. G., 2012. Qualitative Methods. [online] Available at: [Accessed 04 April 2013]. Boone, L. E. and Kurtz, D. L., 2011. Contemporary Marketing. Connecticut: Cengage Learning. Borden, N.H., 1965. 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Appendices Appendix 1: Forecasted Income Statement of the year 2014 Profit and Loss Statement 2012(in millions) Turnover 1008 (-) Direct expenses   cost of raw materials 50 Gross Profit 958     (-) Expenses   Wages and salaries 25 Administrative Expenses 18 Marketing & communication 45 Outlet Rent 18 Electricity Charges 10 Telephone & Internet Charges 10 Depreciation 8.16 Interest 18 Total Indirect Expenses 152.16 Total expenses 172.16 Profit before Tax 785.84 Tax Payment 165.02 Net Profit 620.82 Appendix 2: Cash flow statement forecasting the cash flow in the year 2014. Cash Flow Statement 2012(in millions) Cash at the beginning of the year 150     Operating Activities   Cash Receipts from Customers 1008 Cash paid for:   Raw Material 50 wages & salaries 25 Administrative Expenses 18 Marketing & communication 45 Outlet Rent 18 Electricity Charges 10 Telephone & Internet Charges 10 Interest 18 Income taxes 165.02 Net Cash Flow from Operations 648.98 Investing Activities   Cash received for:   Sale of equipment 112 Cash paid for:   Purchase of property and equipment 68 Net Cash Flow from Investing Activities 44 Financing Activities   Cash Received From:   Fresh Equity Share Capital 22 Additional Reserve & Surplus   Loan 18     Cash paid for:   Repayment of loan 5.2     Net Cash Flow from Financing Activities 34.8     Cash at the end of the period 877.78 Appendix 3: Start up Requirement Start Up Requirements Amount (in millions) Inventory (including food inventory) 118 Vehicle 56 Recruitment costs 8.5 Rent of Godown 10 Preliminary expenses 42     Total Requirements 234.5 Appendix 4: Start up Funding The start up funding will be done on the following basis: Assumptions (In %) Equity 80% Debt 20% Cost Of Capital    5% Start Up Funding Amount (in millions) Equity 187.6 Long term borrowing 46.9 Total Funding 234.5 Appendix 5: Close Ended Survey to the customers Overall, how satisfied you are with the product and services of the food service industry in UK? Satisfied. Dissatisfied. Delighted. Does the quality of the product and service match with your expectations, needs and demands? Yes. No. Do you think that the food service industry has helped the individuals to get rid of the daily routine of cooking their own food and has enhanced the way to enjoy during the weekend with families having lunch and dinner in restaurants? Agree. Disagree. What type of products and services would you like us to provide which the current companies are not providing in the food service market? Differentiation in the food products to a wide range. Some additional services should be provided. Discounts on specific occasions. Free home delivery in case of late service or any other cause of dissatisfaction. Is there any truth behind the question ‘The customer satisfaction is a key factor behind the growth of an industry? Yes. No. Appendix 6: Gantt chart Activities Month1 Month2 Month3 Month4 Month5 Month6 Launch of product and services Planning Promotion Marketing Taking customer feedback Steps for recovery (if some errors) Read More