The Viability of a Business Venture - Essay Example

Opportunity Analysis: Caribbean Restaurant in Sutton Coldfield

Introduction

Starting a business venture is never an easy task; a lot of decision-making is involved beginning with identifying the sector in which the investment is to be made, arrangement of the investible capital and building of required infrastructure (Gyamfi, 2007). The viability of a business venture is dependent on many things, customers being one of the most important factors who are going to buy the products (Botha and Robertson, 2014). The selection of target customer is an important decisive factor because that creates the required market space for a new entrepreneur to enter market and reduces risk burden (Bressler, 2012).

The city of Sutton Coldfield offers a great place to open a Caribbean restaurant. There has a significant growth of Caribbean cuisine all over UK but people of Sutton Coldfield are still waiting for their first Caribbean restaurant in the vicinity (Independent, 2014). Sutton Coldfield is one of the most prestigious locations in Birmingham (Visit Birmingham, 2016). There are many restaurants offering various cuisines like Greek, Indian, Thai, Italian, Mediterranean and other Asian cuisines in Sutton Coldfield (Town Centre, 2016). However, this will be the first outlet offering West Indian cuisine and not just from a particular type but customers will be able to have a taste of all the delicacies from 28 Caribbean islands.

A survey in the form of questionnaire was done in order to gauge the response of the people towards this business idea and a detailed analysis of the market and viability of the business has been presented in this paper. It also focuses on the opportunity analysis of opening a Caribbean restaurant in Sutton Coldfield.

Business details

The restaurant will be serving authentic West Indian cuisine and would be a family restaurant with separate counter for serving liquor. The target consumer group will thus be people belonging to the age group of 18-64years of age. Sutton Coldfield consists of a number of restaurants but there is no outlet offering Caribbean cuisine. The owner can take it as an opportunity of introducing a specialised product which has no immediate competition. This will be highly beneficial for the variety loving population of Sutton Coldfield to get the taste of delicious Caribbean food. It will be three storey establishments with rooftop banquet for parties, office conference and other social gathering.

The entrepreneur needs to provide customers an opportunity to get a glimpse of Caribbean culture differentiating it from its competitors. Hence, the ambience will be aligned to coastal setting with West Indian reggae music playing in the background or band performance on Sundays.

The ground floor and basement will be reserved for parking, the first floor will be available for serving food and the second floor will have the bar. The owner has left a spot for take away but the final decision is yet to be taken.

Location

The restaurant is going to be situated in central Sutton Coldfield. The one-stop eatery will cater to the desire for great food, drinks and cultural bonding. This will not only pull in families, but will also offer a place for business gathering, expanding the revenue source. The location has been chosen so that not only it is close to the rich residential area but also is in close proximity to corporate offices.

Industry and Market Analysis

Product/ Services: The visitors of this restaurant will be able to taste the food from all 28 Caribbean islands. The bar will consist of liquor from beer to premium liquors. Cocktails will be served along with food, but for other alcoholic drinks the customer will have to visit to the bar. The availability of parking gives the restaurant an added advantage to cater more customers because other restaurants in the area have open parking space allowing customers limited time to enjoy their meals. However, covered parking offers more security, so that the customers can enjoy their food in a relaxed manner.

Target market: The restaurant targets people belonging to the age group of 18-65 years. The bar serves as an added feature since customers will not have to go to a separate place for consuming alcoholic drinks. The restaurant will offer a great place for family gathering because of a large dining hall and for privacy the restaurant offers separate booths. The people of UK have over the years developed a taste for spicy food which has resulted in the growth of West Indian restaurants in many parts of UK. This has encouraged the entrepreneur to invest in a Caribbean restaurant. The place of Sutton Coldfield has been chosen, since the place consists of people with high standard of living and there is no Caribbean restaurant in the area. Sutton Coldfield is also a tourist attraction and has a number of prestigious hotels. This offers a great opportunity for the entrepreneur to exploit relatively less competitive market, since it will associate with a greater revenue earning.

The market segmentation will be same as the target market, individuals, families and offices holding conferences.

Industry attractive analysis: Porter’s five force analysis

Michael Porter has devised five criteria to evaluate an industry’s competitiveness. The effective strength of each force determines the intensity of competition in a market (Schermerhorn Jr, 2009). As the competition gets intensified, it acts as a hindrance relating to an entrepreneur’s power to increase prices of products (Harris, 2005). Once the entrepreneurs decide upon which industry to enter managers are required to analyse how strong or weak is the competitive industrial environment (Lee, Kim and Park, 2011)

Figure 1: Porter's Five Force Model

(Source: Author’s creation)

• Buyer’s power: The restaurant will buy its supplies from the local market which consists of large number of suppliers ensuring that the purchase of its requirements is done at a competitive price.
• Suppliers’ power: The local market caters to a large population of buyers ranging from individuals to other restaurant owners. Hence, the suppliers can exert a power over customers. However, the competition among themselves prevents them from charging exorbitant rates from the purchasers.
• Rivalry: There is no Caribbean restaurant in the area although Sutton Coldfield has a number of restaurants offering varied cuisines causing the rivalry to be low. This offers an opportunity to the owner to create its own brand by engaging in a niche market operation. The fast food centres also adds to the competition, but the health conscious people of UK know about the effects of junk food. Hence, they form a weak rival. Limited competition ensures more profit as this will be a Blue Ocean strategy for the entrepreneur. This strategic move will create a new market for the restaurant with a specialised cuisine.
• Barriers to entry: This venture will result in building of the largest restaurant in the area and its specialisation in exotic West Indian cuisine gives a moderate protection against new entrant. This will be one-stop solution for people who are in search of great food in a fresh ambience.
• Availability of substitutes: There is no other Caribbean restaurant hence the establishment is free from immediate competition. However, the presence of other restaurant offers substitution, but dealing in differentiated products makes substitution difficult.
  • Market Potential: SWOT analysis

A SWOT (Strength, Weakness, Opportunity and Threat) analysis is undertaken by a company or business enterprise irrespective of size to analyse its internal strengths and weaknesses against the company’s external market opportunities and threats so that the management can formulate strategic decisions (Gretzky, 2010). It is an integrated approach to assess a firm’s capability in its chosen market environment (Böhm, 2009).

Figure 2: Components of SWOT Analysis

(Source: Mello, 2010)

• Strength: The survey done in Sutton Coldfield to gauge the reaction and preference of people are in favour of a restaurant serving authentic Caribbean cuisine. This shows an opportunity for the entrepreneur to exploit a high market demand.
• Weakness: The setting up of the Restaurant will take time and requires skilled Chefs and employees to attract more customers.
• Opportunities: The entrepreneur should exploit the chance of entering a market where there is no other similar business enterprise. The market offers very little competition with people’s inclination towards having a specialised West Indian eatery. The new restaurant offers one-stop solution where people can enjoy their food and drinks. The restaurant being centrally located, offers great connectivity across people living in Sutton Coldfield. This place is the home of many rich and sophisticated people, so a classy restaurant with difference has a great scope of earning increased revenue.
• Threat: The indirect completion from fast food outlet and other restaurants forms a threat to the business. However, once the popularity of the restaurant gets established, threatening forces will become weaker.

Survey results

The population of Sutton Coldfield is around 96, 000 out of which 59, 000 belong to the age group of 16-54 years (Birmingham City Council, 2015). The survey was conducted across 1000 individuals from households and offices. Survey was conducted by distributing questionnaires that were asked to be returned in a ‘white box’ labelled as “Caribbean restaurant in Sutton Coldfield” placed outside each establishment which were chosen for the survey. The questions consisted of information such as whether they prefer to eat at home or restaurants, how frequently they visit the restaurants in a week/month and lastly they were asked to select ‘yes’ or ‘no’ respectively for answering the question if they wanted to have a Caribbean restaurant in the vicinity.

These responses showed that around 85% people like to visit a restaurant on a weekly basis and it is a part of relaxation to them after their tiresome day in the workplace. This also provides an opportunity for people to spend some quality time with their families. People of Sutton Coldfield prefer to enjoy different types of food and are eager to try something fresh and different. Almost 89% of the people have expressed their liking towards non-vegetarian food and 8% have selected vegetarian food with only 3% being eggetarian. Hence, this shows that restaurant needs to emphasize on adding more non-vegetarian items on the menu. The question about their favourite restaurant was directed to understand which restaurant was occupying a leading position in the market. However, the answers were diverse and proved that people here like to try variety of food. Hence, under the given circumstances, all restaurants are able to run their respective businesses while earning profits.

People of Sutton Coldfield prefer to visit restaurants with their families and friends. Having a bar is definitely an added feature to them, since most of the restaurants do not serve alcoholic drinks with food. 96% were of the opinion that there should be an outlet serving authentic West Indian Cuisine. Majority of people have suggested incorporating a take away counter as it helps them to get meals while travelling.

Technical Requirements

Apart from finance and governmental permissions, in order to open restaurants there are a number of requirements like, hiring of skilled staffs, chefs, and managers. Purchase of furniture, training of the hired staffs, selection of the band and bringing the feel of Caribbean island not only requires finance but also requires research and planning. The scale of the restaurant requires at least 6 well trained chefs and 3 managers to look after the customers’ orders. The floor would need 15 waiters to assist customers and serve their order along with a cashier and cleaning staff. The managers will be responsible for checking the restaurant’ stocks and take the required decisions. Special care needs to be taken so that the customers are able to enjoy fresh food. Service and quality are the main things that ensure prosperity of a business venture (Sithole, 2015). The dining hall will accommodate 20 tables, each with four chairs and corner tables will have options of more chairs, in case of big families. There will be 6 private booths having seating arrangements for 2 people.

Financing

Financing is one of the most important parts of a start-up business and the estimated return from a business informs the entrepreneur whether to undertake the risk of investment in the venture or not (Ayyagari, Demirgüç-Kunt and Maksimovic, 2008).

Figure 3: Estimated Cost of Setting the Restaurant

(Source: Author’s Creation)

Figure 4: Means of Financing

(Source: Author’s Creation)

Figure 5: Estimated Profit after Restaurant Opening

(Source: Author’s Creation)

Figure 6: Profit Curve

(Source: Author’s Creation)

• Conclusion

This paper analyses the viability of opening a Caribbean restaurant in Sutton Coldfield. This decision is backed by the survey conducted through questionnaire, which was distributed among 1000 individuals. Since this restaurant will be the first Caribbean restaurant, it will able to utilise the advantage of less competition. Growth in popularity of the restaurant will help it to exploit the opportunities of expanded market.

The industrial and market conditions are also in favour of the business venture. However, the entrepreneur should consider incorporating the take away section. The survey question that asked for additional suggestions reflected that people want a take away section, which could help them to eat their favourite food at home as well.

• Reference list

Ayyagari, M., Demirgüç-Kunt, A. and Maksimovic, V., 2008. How important are financing constraints? The role of finance in the business environment. The world bank economic review, 22(3), pp. 483-516.

Birmingham City Council, 2015. Sutton Coldfield Constituency Economic and Employment Profile. [PDF] Available at: < https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjm1PLgxvXNAhWBOI8KHWqTBesQFggjMAE&url=http%3A%2F%2Fwww.birmingham.gov.uk%2Fcs%2FSatellite%3Fblobcol%3Durldata%26blobheader%3Dapplication%252Fpdf%26blobheadername1%3DContent-Disposition%26blobkey%3Did%26blobtable%3DMungoBlobs%26blobwhere%3D1223582953631%26ssbinary%3Dtrue%26blobheadervalue1%3Dattachment%253B%2Bfilename%253D678987Sutton_Coldfield_Profile_2015.pdf&usg=AFQjCNGT_zxMETT4QD_N6nUKvE4-Dk9a3g > [Accessed 15 July 2016].

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Bressler, M.S., 2012. How small businesses master the art of competition through superior competitive advantage. Journal of Management and Marketing Research, 11, p. 1.

Gretzky, W., 2010. Strategic Planning And SWOT Analysis. [PDF] Available at: < http://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf > [Accessed 15 July 2016].

Gyamfi, Y. O., 2007. Business Planning Process in a new venture Development. [PDF] Available at: <https://www.diva-portal.org/smash/get/diva2:3477/FULLTEXT01.pdf> [Accessed 15 July 2016].

Independent, 2014. Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival. [online] Available at: < http://www.independent.co.uk/life-style/food-and-drink/features/caribbean-cuisine-is-becoming-increasingly-popular-in-the-uk-and-theres-more-to-it-than-jerk-chicken-9698009.html > [Accessed 9 July 2016].

Lee, H., Kim, M. S. and Park, Y., 2011. An Analytic Network Process Approach to Operationalization of Five Forces Model. Applied mathematical modeling, 36(4), pp.1783-1795.

Mello, S., 2010. Customer Centric Product Definition. Charlottesville: PDC Professional Publishing.

Schermerhorn Jr, J.R., 2009. Exploring management. New York: John Wiley & Sons.

Sithole, M.L., 2015. The relationship between service and product quality, and SME success in South Africa. [PDF] Available at: < http://wiredspace.wits.ac.za/bitstream/handle/10539/18234/Leon%20final%20clean%20copy.pdf?sequence=1 > [Accessed 9 July 2016].

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