Entrepreneurship, Innovation and New Ventures: of Letour Travel Agency - Case Study Example

Executive summary This executive summary concerns the new business venture of Letour Travel Agency. In this summary, the plan demonstrates that the business as situated in Australia. This business plan demonstrates that the travel agency was established in order to meet the needs of the customers in the traveling and tourism industry. Additionally, the business aims at offering high quality, affordable, safe, economical, and reliable services to both local and international customers. Besides, it aims at becoming the leading travel agency in the Australia and the entire world by identifying and meeting customer needs effectively. Furthermore, the organization has a linear management structure, and it is a limited liability firm. Its major personnel comprises of the general manager, sales and marketing manager, human resources manager, finance manager, and customer service representative. Additionally, its major operational departments include the human resources department, customer service department, sales and marketing department, and financial department. These departments are staffed with highly competent and trained personnel that are capable of propelling the firm towards the attainment of its objectives. In terms of the market environment, the organization faces a lot of competition from the existing travel agents in the country. Some of these competitors include Travelscene American Express, Harvey World Travel, Jetset Travelworld, Traveller Choice, and Flight Centre. It has no exit barriers, but has an entry barrier that relates to regulations and licensing by the government and the AFTA body. In terms of its pricing strategy, the company plans to set its prices to the lowest levels at its initial level, but raise them during the expansion and increase in the sales volume. What is more, the company’s SWOT analysis indicates that the strengths include qualified personnel; affordable, quality, economical and reliable services and products; and commitment to attract and maintain as many clients as possible. On contrast, the company’s weaknesses include inadequate staff and insufficient marketing budget. Its opportunities include fast growing industry and increased need for travel and tour by individuals. Explicitly, the business is threatened by low charges of competitors; steep competition; and economic downturn and recession. In order to overcome these, the company is set to train many individuals to meet the clients’ needs; differentiate its services and products from the competitors; and conduct an extensive market research. What is more, the company targets both business and white collar people. Notably, these are individuals that have inconsistent buying patterns as well as have high sensitivity to the prices. In order to achieve its objectives, the company has devised appropriate promotional and marketing strategies that include advertisement, sales promotion, social media, personal selling, trade fairs and exhibitions. The company’s project break even analysis, profit and loss for the next three years, revenues, and balance sheet is demonstrated at the end of the plan. Table of Contents Executive summary 1 Introduction 5 1. Purpose 5 2. Background 5 3. Scope 6 4. Assumptions 6 Definitions 6 5. General analysis 6 6. Business mission 6 7. Business Structure and Management 6 8. Market environment 10 Competition 10 Entry and exit barriers 11 Pricing and service standards in the industry 11 Sales figures 11 9. Plant and equipment 11 10. Skills Assessment 12 11. Risk Analysis 12 12. Ways of dealing with threats and weaknesses 13 13. Operational plan 13 Key Business Objectives 13 Positioning in the Market 14 Pricing Strategy 14 14. Target Market 15 15. Demographics 15 16. Motivation – why they want your product 15 17. When they will buy 15 18. Their buying patterns 15 19. How much they will buy 16 20. How much they will spend and level of price sensitivity 16 21. Communication channels to reach this group 16 22. Distribution 16 23. Promotional strategies 16 24. Sales Targets 17 25. Financial Plan 17 References 22 Introduction 1. Purpose The purpose of this business plan is to illuminate on the business idea of Letour Travel Agency in Australia. The plan seeks to clarify on the business regulatory environment, finance, marketing strategies, operations management and human resources. Additionally, this business plan is intended to find out, describe and refine the competitive advantage of Letour Travel Agent and move it towards the achievement of its set goals and objectives. Letour Travel Agent is a newly opened travel agency in Australia, which majorly deals in city break tour and travel. The business has full distribution license, rights and franchise in the country. In addition, the business is set to be operational in the whole of Australia as it has many branches in various cities. It is also intended to identify and meet the consumers’ needs effectively by providing safe, reliable, quality and affordable services than other travel agents. 2. Background Letour Travel Agency was started with an aim of becoming the leading travel agent in Australia. This implies that its establishment was motivated by the fact that consumers complain about expensive, unreliable, risky, and poor quality tour and travel services that are offered by the already existing agents in Australia. Besides, the company also provides basic services, such as, consultation, activity planning, ticket and hotel reservation, tour route setting and insurance. Therefore, the business was established in order to meet the aforementioned needs and to develop the country’s tourism and hospitality industry as well as creating job opportunities for the Australians. The business’ proprietors include William Brown, Mitchell Brown and James Whitestone. 3. Scope The business is widespread in the country through its branches, and every branch has its specific services and products to the clients. 4. Assumptions In the operation of this business, the company assumes that the consumers are not satisfied with the other travel agents that already operational in the country. It also assumes that the business is going to make high profits as well as becoming the leading travel agent in Australia. Definitions Letour is a term that means to travel. 5. General analysis 6. Business mission Business vision: to become the leading travel and tour agent in the country. Business mission: to provide high quality, affordable, safe and reliable products and services to consumers in the within and without the country. Therefore, the business mission is to provide safe, affordable, reliable and quality services and products to the internal and global market so as to meet their economic and recreational needs. It also targets the business people and urban white collars consumers. The business is committed to meet both the shareholders’ and consumers’ needs. 7. Business Structure and Management Just like any other company, Letour Travel Agency has its unique business structure and management. In terms of the structure, the company adopts a linear organizational structure. This implies that there are a number of authority and responsibility levels in the organization. Additionally, this means that the company has communication that exists among equal peers, as well as up and down the organizational hierarchy. It also organizes the information in a sequential manner, which is an ancient means of navigation. Explicitly, the company’s structure involves the finance department, sales and marketing department, customer service department, activity planning department, and personnel department (Dunn 2006, pp. 13-20). To begin with, the finance department of the company is charged with as responsibility of controlling the company’s funds so as to ensure that they are used appropriately. Secondly, this department has a role of analyzing and accounting for the company’s financial situation as well as improving its capital efficiency. Moreover, the company’s finance department is responsible for all the bonus payments and wages that are mad to the shareholders and the employees. Secondly, company’s sales and marketing handles the organization’s marketing and sales activities. The department employees various marketing channels and the media in an attempt to effectively promote the company’s new tourism offer and programs. This is also meant to help the company in the expansion of its influence both in the national and international markets. It is also in charge of the sales groups travel services of the company. Thirdly, the company has a customer services department that is influential in ensuring that its customers are given quality services and treatment in the company. Furthermore, the company is responsible for the reception of the customers and selling of the travel services (Pinson 2008, pp. 10-20). In addition, this department ensures that there are appropriate records of the customer data as well as building of the customer files. This implies that there are routine records of the clients that are used to offer travel programs in the company. The department is also instrumental in arranging high income clients to make plans for their luxurious travelling. Fourthly, the company has the activity planning department that is charged with the responsibility of ensuring that the company takes part in its planning and implementation activities. This also includes external and internal agreements of the company as well as drafting of certain contracts. Notably, the department also ensures that there is an efficient collection of information that relates to the business by using certain channels. Lastly, the company has a personnel department which is also referred to the human resources department. Here, in its initial stages, the company aims at spending $350,000 in the employment of personnel, welfare and wages. Currently, the company recruits some professionals in the field as its advisors. Strictly, the company’s personnel comprises of individual holders of bachelor’s degree or anything above that. It also insists on employing people that major in human resource management, finance and tourism management. Among the company’s key personnel are the sales and marketing manager that handles any issue that concerns marketing and promotion of the company’s products and services. More so, there is the general manager whose major role is to supervise every activity that takes place in the company. The general manager is responsible for the implementation of policies, programs and plans as well as the organizational decisions. He also handles daily affairs and operations of the company as well as managing the assets and resources of the organization (Wysocki 2011, pp. 14-19). In addition, the general manager helps in the preparation of the annual and strategic plans, annual assessment and reports of the company’s performance. He also facilitates the coordination of proposals used in the development of policies, objectives and programs for company’s consideration. On the other hand, the company’s marketing manager has various duties that include approval of images, management of business budgets; measurement of the business success; management of marketing mix; management of customer journey; reporting and researching on external business opportunities; instilling of a marketing ethos in the business; and understanding of the potential and current clients; management of business agencies; development of guidelines; and making of client focused decisions (Wysocki 2011, pp. 14-19). What is more, the company’s customer service personnel that helps in the solving clients’ problems in the organization; assisting in making sales of the company’s products and services; and conducting clerical tasks in the firm. He also ensures that all calls made to the company are answered appropriately, and documented effectively (Blackwell 2011, pp. 12-17). Customer care personnel also promotes suitable listening skills; management of length of calls; promotion of teamwork as well as the success of the call centers; and the maintenance of effective and clear communication among the participants. Besides, the customer care personnel are also instrumental in the provision of quality client service on each call, and carrying out of follow-up activities with the clients. Customer care representative is also charged with the responsibility of listening to and critiquing recorded conversations in order to enhance customer communication skills. He also priorities and organizes organizational duties. The top senior staff member in the company is the general manager who assumes the organizational full responsibilities. Besides, the company operates as a limited liability organization. This implies that the company blends elements both corporate and partnership structures in its operations (Wysocki 2011, pp. 14-19). It also offers limited liability to its shareholders and it is not mainly organized for profits. More so, this business’ owners are not absolutely insured from personal liabilities. This is because there are certain cases in which the court can pierce the corporations’ corporate veil in order to solve a misinterpretation or fraud (Wright 2008, pp. 13-18). As a limited liability company, Letour Travel Agency has a number of partners that are committed to work jointly and diligently in order to achieve their objectives and mission. This is possible in that they have a strong business relationship that is vital in the effective operation of the business. 8. Market environment Competition The business has a favorable market environment that enables it to run its operations successfully. To begin with, the Australian hospitality and tourism industry faces a steep competition because of the numerous travel agents and agencies in the country. For instance, there are about 4,500 travel agents in the country, and main retail travel networks in the country include Travelscene American Express, Harvey World Travel, Jetset Travelworld, Traveller Choice, and Flight Centre. Through the Australian Federation of Travel Agents (AFTA), the business together with other agents is represented. Additionally, AFTA has over 2,500 retail outlets and more than 100 allied industry companies, tour operators, hotels and wholesalers among others. This is also result in more than 2600 members’ (AFTA 2011). The market is also maintained by AFTA constitution prescription, which requires that every member should carry on its travel agent business from authorized premises and hold an insurance policy of professional indemnity. Entry and exit barriers There are certain entry barriers to the tourism and hospitality industry in Australia that include government regulations and licensing of the business by the business. Fortunately, the business has no exit barriers. Pricing and service standards in the industry Since one of the company’s objectives and goals is to provide affordable and quality services to its clients, it has set standard prices that are appropriate for the current and potential clients. Its services are priced averagely in such a way that makes it affordable and economical for the target market. It also delivers high standard services that are instrumental in the satisfaction of its clients’ needs. Sales figures In terms of the industry’s available sales figures, it is explicit that it makes estimated sales that are worth $390, 000, in the first year, $ 4,047, 220 in the second year, and $10, 722, 500 in the third year. 9. Plant and equipment Letour Travel Agency requires a number of things so as to effectively operate in the market. Some of these requirements include highly-skilled labor force, adequate operation funds and space for establishing their outlets in various parts of the country. The company also requires good infrastructure and sufficient traveling vehicles and planes so as to transport the clients to various destinations effectively. 10. Skills Assessment In order to efficiently run its business, the company requires certain skills and qualifications. The employed personnel should hold bachelor’s degree of human resource management, and sales and marketing. It also needs individuals that possess great communication, leadership and customer service skills. Its current proprietors hold bachelor’s degree in business administration, human resource management, and sales and marketing. Impliedly, the company strictly considers individuals wishing to be employed to undergo adequate and quality training on the aforementioned fields. 11. Risk Analysis The company’s SWOT analysis is as follows: Strengths the management is committed attract and maintain clients in a competitive market the company offers economical and affordable services in the entire market the company hires highly qualified and trained personnel The company is strategized to meet the customers’ needs. Weaknesses personal training of the staff is expensive the company has an inadequate marketing budget that is required to attract business customer there is insufficient staff that provides services to the customers Opportunities the tourism and hospitality industry is fast growing too much work and business meetings makes people need recreation and efficient traveling agencies respectfully individuals find it easy to operate with a travel agent than a public means people are getting used to traveling and tourism in the country Threats The industry’s growth rate is threatened by economic downturn and recession high competition from the already existing travel agents in Australia low charges offered by the competitors 12. Ways of dealing with threats and weaknesses The company can overcome the aforementioned threats and weaknesses by: providing adequate training for the existing members of staff employing highly competent personnel differentiating its business from that of the competitors’ adjusting its marketing budget conducting extensive marketing and promotional activities 13. Operational plan Key Business Objectives Some of the company’s goals and objectives include: to become the most preferred travel agent by providing quality, affordable and economical services to its clients to identify and effectively meet the clients’ needs to offer clients unique travelling and touring services that are safe and reliable to boost the clients’ attraction and retention by 20% by the end of 2012 to make a total annual profit of approximately $50, 000 Marketing Market Research Before the compiling of this business plan, some market research was carried out. Here, the research team investigated on the problems faced in the tourism and traveling industry in the country. Moreover, the team also investigated on the needs of the clients as well as ways of effectively meeting those needs. Additionally, the research team researched on the potential competition in the industry as well as the target market. It was also imperative to investigate on the total estimated cost of starting and running the business before it is in a position to make profits as well as the approximated amount of profits that are projected to be attained in the end of the year. Positioning in the Market The business is situated in both urban and rural locations so as to reach out to all its potential clients. In order to outdo other competitors, the company differentiates itself by providing unique services that are affordable, economic, reliable and safe services (Harrison-Walker 2011, pp. 12-19). This way, the company can attract and retain as many clients as possible. Pricing Strategy The company’s pricing strategy is designed in such a way that there are fixed cost and current cost. In order to achieve its objectives, the company first charges low prices for their services. Later, the company is set to expand its market and increase the sales popularity and volume so as to raise the amount of profits per year. Therefore, the company’s positioning is appropriate in the achievement of set goals and objectives of the business (Frickenstein & Finch 2006, pp. 20-25). Besides, the organization’s pricing considers the competitors’ prices and positioning strategies. Impliedly, the competitors’ service charges are higher than the company’s; hence, it can attract and retain many customers. Moreover, because the clients in the industry are highly sensitive to prices, the company has set affordable and economic prices. 14. Target Market 15. Demographics The business targets various consumers that are based in different parts of the country. These customers are based in both rural and urban areas, both male and female who run private and public businesses. The business also targets white collar clients and business people in Australia and other parts of the world. 16. Motivation – why they want your product The business’ services and products are highly required by the target market because of the need to attend business meetings and conferences, and the need to for recreation and leisure among the customers. The organization’s price is also required because it is economical and affordable, reliable, quality and safe services as compared to those of the competitors. 17. When they will buy The business expects that the clients will buy its products and services at all times of the year, especially during summer seasons. In case of the business people, they are likely to buy the products and the services throughout the year because businesses run for the whole year. 18. Their buying patterns The target market has consistent buying patterns since travelling and touring take place in all seasons. 19. How much they will buy The target market is known to buy products and services in large amounts, depending on the situation and the prices. 20. How much they will spend and level of price sensitivity The amount of money spent by the target market largely depends on the socio-economic factors and the number of products and services needed at a particular time. For instance, in a year, each of the white collar clients spends over $100. In terms of the sensitivity to the prices, the target market is highly sensitive to price changes in that they tend to shift to lowly charged products and services in the industry. 21. Communication channels to reach this group The target grouped can be reached through certain communication channels that include promotion, social network media, personal selling, advertisement, and trade fairs and exhibitions. 22. Distribution The company products and services are set to reach the target market through various channels that include franchises in different parts of the country; licensing of outlets in certain parts of the country and online operations. The products and services will also be delivered directly to the customers by the employees, especially the customer service representatives. 23. Promotional strategies Some of the ways in which the business will promote and market its products and services for the next one year is through advertisement, sales promotion, exhibitions and trade fairs, personal selling, print and online media (Terblanche 2005, pp. 10-16). These activities will cost the company a substantial amount of money that is approximately $100,000 per year. In case of the existing clients, the company will employ sales promotion and sales promotion to retain them, while the past clients will be captured by advertisement, social media, and personal selling. Besides, new clients will be best attracted and retained by advertisement, social medial, exhibitions, and personal selling. 24. Sales Targets The company aims at making a total sale worth $350, 000 in the first year. This amount is attained by basing on the business infrastructure and capacity. 25. Financial Plan Historical figures The business is not bought from already existing proprietors; hence, it has no historical figures. Start-up expenses The business start-up capital is outlined follows: Startup Expenses Letour Travel Agency Sources of Capital Investment requirement $2,000,000 - Total Investment $2,000,000 Startup Expenses Agency development $446,000 Personnel $390,000 Capital Expenditures $250,000 Consulting Services $100,000 Promotion $6,000 Total Start-up Expenses $1 186,000 Cash Flow/Cash Position Breakeven Analysis Letour Travel Agency Cost Description Fixed Costs ($) Variable Costs (%) Variable Costs Personnel 20.00% Consulting services 4.00% Fixed Costs Health club development $446,000 Personnel $390,000 Capital Expenditures $800,000 Consulting Services $150,000 Promotion $6,000 Taxes $30,290 Total Fixed Costs $813,290 Total Variable Costs 24% Breakeven Sales level = 2049759 Balance sheet projection Balance Sheet (Projected) Letour Travel Agency Beginning Projected Year 1 Assets Current Assets Cash in bank $20,000 $2,012,710 Accounts receivable - 24,040 Prepaid expenses 2,500 2, 500 Total Current Assets $21,500 $2,028,250 Fixed Assets Training Machines $446,000 $760,000 Furniture $250,000 $250,000 Total Fixed Assets $596,000 $910,000 TOTAL Assets $607,500 $2,838,250 Liabilities and Equity Current Liabilities Accounts Payable $0 $50,140 Long-term Debt Bank loans payable $0 $2,000,000 Total Liabilities $0 $2,040,140 Owners' Equity Retained earnings – beginning $607,500 $607,500 Retained earnings – current - $290,610 Total Owners' Equity $898,110 Total Liabilities & Equity $607,500 $2,838,250 Profit and Loss Projection (3-Year) Year 1 Year 2 Year 3 Revenue (Sales) Training equipment Total Revenue (Sales) Operating Expenses Travel agent development Capital expenditure Personnel Promotion Consulting services Total operating costs Profit before taxes Taxes (10%) $2, 225, 000 $2,230,000 $446,000 $390,000 $250,000 $100,000 $5,000 $991, 000 $422,900 $42,290 $5,900,000 $5,940,000 - $940,000 $248,000 $580,000 $6,000 $2,474,000 $4,385,800 $438, 580 $24,700,000 $24,751,000 - $1,040, 000 $250, 000 $580,000 $7,000 $2,576,000 $23,025,000 $2,302,500 Net Profit $390,610 $4,047,220 $10,722,500 References Blackwell, E 2011, How to prepare a business plan, Kogan Page, London Philadelphia. pp. 12-17. Dunn, C 2006, Let's plan a business: an entrepreneurial approach ,5th ed, Enterprise Edge, Fitzroy North, Vic. pp. 13-20. Frickenstein, J & Finch, JE 2006, ‘Badger Service & Supply: Pricing Strategy, Value Creation, and Channel Disintermediation in Wholesale Distribution’, Journal of the International Academy for Case Studies, vol. 12, no.2, pp. 20-25. Harrison-Walker, LJ 2011, ‘Strategic Positioning of Nations as Brands’, Journal of International Business Research, vol.10, no. 4, pp. 12-19. Terblanche, NS, 2005, ‘A Century of Marketing: Achievements, Mishaps and Future Challenges Management Dynamics, vol.14, no.5, pp.10-16. Pinson, L 2008, Anatomy of a business plan: the step-by-step guide to building your business and securing your company's future, Out of Your Mind ... and into the Marketplace, Tustin, CA. pp. 10-20. Wright, RE 2008, ‘Targeting, Segmenting and Positioning the Market for College Students to Increase Customer Satisfaction and Overall Performance’, College Student Journal, vol. 42, no. 12, pp. 13-18. Wysocki, R 2011, Effective project management: traditional, agile, extreme, Wiley, Indianapolis, Ind. pp. 14-19. Appendices Graphical presentation of SWOT analysis Helpful in the achievement of objectives Harmful in the achievement of objectives Internal commitment to attract and maintain customers economic and affordable services highly qualified and trained personnel expensive staff training inadequate marketing budget insufficient competent staff External fast growing industry high need for tourism and traveling agency due to too much work and business meetings high preference for traveling agents to public means people are used to touring and traveling low charges offered by competitors high competition from already existing businesses economic downturn and recession Curriculum vitae for proprietors Skill category Grading of Skills Underdeveloped Well developed List of relevant skills 1 2 3 4 5 Human resource management Sales and marketing Customer services Finance and accounting Management N/A Startup Expenses Letour Travel Agency Sources of Capital Investment requirement $2,000,000 - Total Investment $2,000,000 Startup Expenses Agency development $446,000 Personnel $390,000 Capital Expenditures $250,000 Consulting Services $100,000 Promotion $6,000 Total Start-up Expenses $1 186,000 Cash Flow/Cash Position Breakeven Analysis Letour Travel Agency Cost Description Fixed Costs ($) Variable Costs (%) Variable Costs Personnel 20.00% Consulting services 4.00% Fixed Costs Health club development $446,000 Personnel $390,000 Capital Expenditures $800,000 Consulting Services $150,000 Promotion $6,000 Taxes $30,290 Total Fixed Costs $813,290 Total Variable Costs 24% Breakeven Sales level = 2049759 Balance sheet projection Balance Sheet (Projected) Letour Travel Agency Beginning Projected Year 1 Assets Current Assets Cash in bank $20,000 $2,012,710 Accounts receivable - 24,040 Prepaid expenses 2,500 2, 500 Total Current Assets $21,500 $2,028,250 Fixed Assets Training Machines $446,000 $760,000 Furniture $250,000 $250,000 Total Fixed Assets $596,000 $910,000 TOTAL Assets $607,500 $2,838,250 Liabilities and Equity Current Liabilities Accounts Payable $0 $50,140 Long-term Debt Bank loans payable $0 $2,000,000 Total Liabilities $0 $2,040,140 Owners' Equity Retained earnings – beginning $607,500 $607,500 Retained earnings – current - $290,610 Total Owners' Equity $898,110 Total Liabilities & Equity $607,500 $2,838,250 Read More