Commercial Feasibility Analysis - Assignment Example

Commercial Feasibility Analysis Name: Course: Tutor: Date: Commercial Feasibility Analysis Q 1 Hospitality business forms one of indispensable service business sector in any economy. It encompasses areas such as lodging, restaurants, transportation and event planning. An influx of visitors in any area demands that structures ought to be put in place to cater for their accommodation and hotel services. Therefore, for the reasons stated above, hospitality business forms a business opportunity that any individual with entrepreneurial skills would love to seize and invest much on it. Q 2 Before commencing any business activity, the nature of the market forms a critical aspect that has to be evaluated in detail. My business being located in an area where there is a large influx of both domestic and international tourists. Hospitality industry offers both the catering and the lodging services to the tourists. For this reason, the market size would be large considering that tourism and hotel industry go hand-in-hand. The market growth of the firm over the next three years would be gradually increasing. At the beginning when still operating as a small business enterprise, the firm is bound to attract the majorly domestic tourists. With time and as it is popularized through advertisement and customers positive attributes of the firm, there stands an extraordinarily high chance of this market size to grow gradually and even attract the foreign tourist to form part of the customers. Hospitality business being tourism dependent experiences periods of booms and recessions. These periods are accurately foreseen making the market stable. Nevertheless, the periods of boom tend to override the recession as tourists from different continents arrive at different time depending on holidays in those regions (http://www.smallbiz.nsw.gov.au/ideasonline) The sustainability of this business idea is more than eight years. This exists because the demand for hospitality is on the upward trend and there is no chance of being overtaken by any other sector in the economy. It is there to stay. This business idea has high extensions. This implies that it can be diversified to cater for many other services, which may include providing tourist guide services, transportation services for the tourist, advisory services to the potential tourists and finally organizing travel logistics for the tourists. The business idea has an exceptionally high approval rating especially considering the convenience it offers to customers who have travelled a long distance and need a place for catering and accommodation. The recognition of this idea is obvious. Less effort is required to try to sell the importance of your new business idea to the potential customers. This is because most individuals understand the importance of the hospitality sector. The idea has remarkably high compatibility with the existing attitudes of the potential customers. Everybody craves for better hospitality, which I strongly believe; do not go against any existing culture or beliefs. Complexity of the usage of the service is extremely low. This occurs because hospitality is something that every person has experience because they were born and no learning is needed for the usage of the service. The optimal distribution for my customers to get the hospitality service is going to be exceptionally straightforward and inexpensive. This is because one requires their presence in my premises and the rest of the service will be offered to them. The idea in terms of differentiation is noticeably better or worse from the competitors already in the market at the beginning. However, in the future, I wish to initiate some services such as regularly offering free tours for my permanent customers. I hope that this will give me an edge over some competitors thereby making my firm superior. The value for my services will be much higher than competitors as the quality of catering, and highly skilled personnel will handle accommodation. Customers negotiating leverage will somehow be moderate, and this offer will particularly be available to those customers who have established some degree of loyalty to my firm. Since the business is a service industry, suppliers negotiating advantage is not a significant factor to consider as here what matters most is my strategic positioning in the market in terms of advertisement. The vulnerability of my business idea to the competitors is high, but once one is in the market then what truly matters is the quality of the service offered to clients (http://www.smallbiz.nsw.gov.au/ideasonline) Q 3 Risks Regulatory risks: Relative to the existing laws, standards and other regulations such as health standards and customers’ safety, my business idea will meet them without any changes. Technological risks: The technology for which my idea of hospitality business is based on is remarkably stable for the near future and thus less likely to be affected significantly by technological changes. Environmental risks: My idea will have no impact on the environment if properly used especially in regards to the refuse disposal. The socioeconomic risk: The impact of my idea to the socioeconomic forces will be exceedingly positive Dependence risk: This forms the greatest external risk to my new idea as it majorly depends on the tourism industry. Planning risk: The preparation for the business plan for the idea is underway and soon will be finalized. This will serve to curb risks that result from poor planning. Marketing risk: proper investigation of the market characteristics has been adequately conducted, potential risks identified, and methods to counter them identified. Deliverables risk: These risks are minimal. The hospitality services can be offered consistently at high quality if the qualified staff and equipment are acquired. Liquidity risk: The money to commercialize my idea will be majorly from my borrowing capacity and contributions from family and friends. This risk is somehow moderate. Personal risk: The business idea has the least risk when it comes to personal risk, but with insurance cover, this could somehow be mitigated. Q4. SKILLS Marketing expertise: This business critically needs effective marketing strategies that would portray its image to the potential clients positively. The services of marketing expertise with a diploma certificate in marketing and one-year experience in the field will be required. Technical expertise: For better service delivery to the esteemed customers, technical knowledge comes in handy. Therefore, a qualified technical staff with a diploma certificate in any technical courses will be needed (electrical, and communication engineering will be an added advantage). He or she should have at least one-year experience in the field. Financial expertise: This includes the accountants and other financial advisor. The accountant should have a minimum of a diploma certificate in accountancy with experience of at least one year in a related field. The business will embrace the advisory services majorly from its bank to cut down on the costs. Operational expertise: The manager with my support will majorly carry out this function. Managerial expertise: A highly qualified manager with at least a degree certificate in hospitality and hotel management is required to oversee the day-to-day operations of the business. Resources Physical resources: A large floor area of approximately eight acres of land is required. In it, a premise covering about half of this area should be available and more preferably should be storey kind. The first floor forms the restaurant while the second one forms the lodging facilities. Extra space in the compound provides the parking space. Financial resources: Assuming that the premises are readily available and the renting is the only thing that is required, the initial renting cost would approximately range from 5000 to 6000 US dollars per year. This has to be paid double in the first year totaling up to approximately 12000 US dollars. Intellectual resources: The business just needs a moderate specialized knowledge, which will mostly be provided by the management. Network resources: Facebook and tweeter will be embraced. Year 1 Year 2 Year 3 Sales (income from services offered) U$56400 U$63200 U$64400 Cost structure U$48000 U$50000 U$50000 Profitability U$8400 U$13200 U$14400 Cost structure Rent: U$6000 Salaries and wages: U$34000 Transportation: U$4200 Trade license: U$2400 Miscellaneous: U$1000 Financial structure Assets: U$20000 Capital: U$30000 Liabilities: U$10000 Q 5 Since the ultimate goal of any business is to make profits, the business can be said to be commercially feasible as its average yearly profit estimates is U$13000. Considering the fact it faces minimal external risk factors, it stands in a better position to compete favorably with its competitors. References English, J 2010, Discovering New Business Opportunities: ReadHowYouWant.com, UK Maheshwari R, 1997, Principles of Business Studies: Pitambar Publishing, Australia http://www.smallbiz.nsw.gov.au/ideasonline Read More