Product mapping
Using these Restaurant/Pubs (on the Bristol Road) I will make a product map:
- Bristol Pear
- Bear & Staff
- The Soak
- Goose at the O.V.T
My product map shows that there is a good spread of Restaurant/Pubs in Selly Oak.
There are 5 gaps in the market as shown below:
1. Young and expensive
2. Young and relatively inexpensive
3. Relatively young and relatively cheap
4. Old and relatively cheap.
5. Relatively old and expensive.
1. The younger generation do not tend to have much money so "Young and expensive" is
most likely not the best idea.
2. Looking at the 2nd and 3rd placement, "young and relatively inexpensive", this seems like a very feasible option, as Selly Oak has a large population of students. Students are notoriously not willing to spend large amounts of money, so this placements seems reasonable.
3. The 4th gap, "old and relatively inexpensive", is not that promising for the
reason that there are not that many old people in Selly Oak compared to the other areas of Birmingham. An inexpensive venue in an area which is largely populated with students will quickly become filled with students, and therefore, marketing of the business should target the age group which make up the largest percentage of customers.
5. “Relatively old and expensive”, is again not the most feasible idea as the population of older people who are customers of these venues is rather limited, and therefore this target market will not provide the maximum amount of potential customers, and therefore will not maximize the profit of the company
The market
A market is where buyers and sellers come together to transact. I therefore need to conduct some research on these two aspects of my market.
Within this aspect of my business plan, I shall investigate the market by researching the opportunities presented by the amount of consumer spending and the areas/segments within which they spend.
I will also consider the threats presented by rival, competing firms/businesses already present within the market.
The restaurant and bar market is an oligopoly market since there are 5 to 6 large compared supplying over 50% of the market. The rest of the market is supplied by many small businesses. The restaurant and bar market is also a saturated market since there are so many rivals.
Rivals may respond to my business entering the market by improving factors such as prices, promotions or products, but the most dangerous factor is price because a price war may result and all businesses will experience lower profits and possible failure.
The opportunities provide my new business with a potential market since its growing by 19% and the way that it is segmented suggests that a young adult target market could be the focus of my business.
A few other important things that I found out were that there was a 19% growth in the market, eating and drinking controls 50% of the leisure and recreation and customer expenditure has risen 28.4% in this sector.
Advertising budgets could be too high in rivals and we cannot compete. Also if the market is saturated with rivals, there may be little opportunity to get new customers.
If we needed to beat competitors, one thing which we could definitely improve would be the quality of food, drinks and service in this bar/restaurant.
My attitude towards pricing will generally be medium. This is because it is in an area where there are many students who don’t usually have an income. It will also bring more customers since it is not extremely expensive.
My rivals might respond by putting up more adverts and deals in their restaurant/pub. I will try to reduce the possibility of a war starting by having my promotional offers at different times to when they have their promotional offers.
The role and importance of marketing – price, promotion, finance and production
The marketing section of a business is very important in the way that they are the ones that are in complete control of the product, the price, the promotion and the place (the marketing mix). Without them, the business would not do as well, because the correct price will ensure that the product is bought. If the price is too high, it will not be bought and if it is too low, people may think that it is bad quality or the company might not make a profit from it. The promotion is important because it lets the people know that the product is there and available. It also helps advertise and persuade people to buy the product. The place of the business or where the product is sold is extremely important in the way that if the business is in the middle of nowhere, no-one is going to be buying anything and if it is in the middle of a lot of competitors, it may be hard to survive.
The finance in a business is very important in the way that it provides control, monitoring and reporting of our cash and profit position, will draw up a cash flow forecast to monitor and predict the cash position, will have in place systems to raise orders, process invoices and make payments and will be able to calculate and report profits.
The customer service sector in a business is critical to maintaining the reputation of the business by insuring that customers have a great experience and will become repeat customers in the future and will tell their friends and family about their experience.
Section 2: Managing Business Activities
Effects on quality & cost implications
In this section of the report I will consider how and why it is important to monitor the activity of my business. I will also analyse and evaluate how a number of factors will affect the quality of the business and the service it provides, and what the cost implications are to provide and improve this level of quality.
Managers have to monitor, review and control the activities of their business. There are 3 factors, which will affect the performance of my business. These are human resources, physical resources and finally financial resources.
Human Resources:
Firstly, human resources (people) are extremely important in any business and mine is no exception. I will need to recruit, train and appraise all staff.
Human resources will affect the human resource planning, recruitment and selection of new employees, training and development, performance appraisal, remuneration packages, disciplinary procedures, health and safety issues, looking after the employees’ welfare and dealing with the termination of contracts of employment.
If the human resources are not efficient, the employees might not be right for the job, they might not be doing the work in the right way, the employees might be de-motivated or have bad job satisfaction and might be abusing health and safety issues. The cost is that the company may have to fire mistakenly employed staff and go through the recruitment process all over again. This will take more time and money from the business and will further result in bad customer satisfaction.
Staff Recruitment:
Staff recruitment is a process of finding right people for the right job or function. There are many people of which I will have to find to work in my business such as chefs, waiters/waitresses, bartenders, sales staff and cleaners. The way that I will recruit staff is by putting up adverts in not only the local newspaper but also around the area of the premises, for example in local stores i.e tescos.
The recruitment and selection process commences when the business realises that there is a space in the organisational hierarchy which needs to be filled. A few reasons why there might be a space are that if more employees are needed, more skilled, experienced employees are needed, if employees leave due to poor job satisfaction or for other reasons, if the business expands or if there is internal promotion.
Firstly, in the recruitment and selection process, a job description needs to be written, this will outline the job title, what the successful applicant will be responsible for, who they will be reporting to, their key duties and the terms and conditions (pay, holidays, pension, perks and hours). A job specification will also need to be written, this will list the physical and mental attributes that will be desirable or essential (such as qualifications, experience and interests).
An advertisement for the job will be written and placed in newspapers, job centres, job agencies, the internet, radio and internal notice-boards in order to get as many people as possible to apply for the post. The advertisement will include the hours of work, the pay and fringe benefits, the job title, the experience and qualifications that are required and a contact name and address.
Application forms will then be sent out and curriculum vitaes will be requested from the people that wrote expressing a desire to apply for the job.
Once the application forms are completed and returned, the short-listing process will commence. The short-listing process involves analysing the CVs and application forms and deciding which applicants appear to be most suitable for the post.
Once this is done, the successful applicants are contacted and an interview is arranged.
The interview will be well structured, uninterrupted and conducted in a friendly manner, with the use of open-ended questions which should give the applicants the chance to talk openly about themselves. At the end of the interview, the applicants will be given the opportunity to ask questions about the job and the business. The interviewer will finally inform the applicants when they will be notified of the decision.
The chosen employees will be given a contract of employment which is a written statement covering the terms and conditions of employment. The terms and conditions of employment will include the date the employment commences, the job title, pay, hours of work, holiday and pension entitlements as well as the process for disciplinary and grievance procedures.
Staff Training:
A few training methods which will be needed in my business are induction training (basic), for skills development, for attitudes, competencies and management/supervisory. Training can improve employee productivity, create a multi-skilled, flexible workforce, increase the levels of job satisfaction and motivation and increase the chances of employee’s promotion.
After a new employee has been appointed, they will receive induction training in order to help them settle into the new job. This induction training covers the basics of the new employee’s job as well as the background details and the history of the business.
Induction training will be used for new staff and will be used as preparation for the job they are about to take on. It will be done to help new employees reach performance levels expected. It will contain information about the layout of the business’ operating facility, health and safety measures and security systems. Finally, the individual key employees and the culture of the organisation will be introduced.
Staff Appraisal:
Staff appraisal is one way of developing individuals and focusing their efforts in line with those plans and objectives. This will be done by giving staff targets and rewarding them when each is achieved.
Physical Resources:
Premises:
The location of the premises is important, as it should be easily accessible, however it should preferably be a reasonable distance away from competition. If the business is not easily accessible, people will find it an effort to visit the venue, which may result in a reduction in the amount of customers visiting the business, which means profit will not be maximised. As well as distance however, if the location chosen is too competitive, the business may loose customers to other restaurants, and will also lose profit. Therefore, the location of the business is essential.
As a business just starting up, the cost of buying a property would probably be too expensive. The investment in the premises is too much for a small business starting up but it would mean less security, as the property does not technically belong to the business. Also the company would cost a lot to set up so they really cannot find the capital to buy the property, especially as banks would probably not give such a great loan to a small, starting up business.
Another thing that needs to be thought about is the legal restrictions of the area. Disabled access would need to be planned and toilet facilities for disabled and non-disabled customers.
Equipment and stock:
Approximate start-up costs of equipment:
Kitchen equipment
work table £200
fridge £300
dishwasher £300
general equipment £300
oven £300
storage units / sink £750
griddle £1,000
total £3,150
Restaurant equipment
till £150
storage / servery £350
tables x10 £750
crockery and cutlery £750
chairs x30 £1,050
total £3,050
Premises
shop sign £150
deposit on building £1,458
decorating and fitting £1,500
total £3,108
Food and Beverage
food for the store £250
food for the kitchen £250
deserts £100
alcoholic drinks £200
soft drinks £150
Financial Resources:
Credit Cards - this gives only a limited amount of capital as it relies on the bank that would not be likely to give an overdraft to a new company who had collected the figures in
this report. Also there would be a lot of interest.
Friends and Family - a good source of limited capital, the upside of this is that there is no real
interest to pay. However it is a very limited source of finance and depends on
relatives.
Personal Savings - depending how much there is in personal savings. Using these creates great risk. It may mean that if you go bust, even if it is a limited company, then those
personal savings are gone.
Bank Loan - it may be difficult to secure a loan for this business given the figures. Also there would be interest to pay.
Venture Capital - A good source but relies on there being enough interest in the business to secure the venture capital.
In all we can see that it would be difficult to secure enough money to actually start up the business. More research would need to be done to confirm the research figures and also as to where to get the finances from, considering that they would be a large amount due to the area being expensive and the nature of the business.
Financing Options:
There are two ways of financing:
- Match the type of asset to the length of the loan i.e. long-term asset to long-term finance.
- Use a range of finance sources.
Suitable options:
Long Term:
- Fixed assets – bank loan – must offer security and interact
- Take on an extra partner – will bring in extra capital but
- Venture capital – get finance from a venture capitalist but they will want control.
- Owners own money – capital
- Debenture – loan with a friend weren’t payable
- Mortgage – to buy the premises, much longer term
- Cease or pay monthly and may own the aspect at the end
- Sell shares – only companies!
Short Term:
- Stock and expenses
- Credit – normally 30 days
- Overdraft – flexible but expensive
The role and importance of quality control, quality assurance and total quality management (TQM)
Total quality management is the attempt by a business to stop errors and waste from occurring at all levels within the organisation. It also encourages employees to make ‘quality’ paramount within their daily activities. Total quality management has five different parts to it.
-Internal relationships between workers and their superiors/subordinates are seen as important as the external relationships between the business and its customers/suppliers.
-Total quality management is seen as a policy which is followed by all workers.
-The business monitors all activities and processes to identify any areas for improvement and to ensure quality is achieved.
-Teamwork is important to develop skills, co-operation and motivation.
-Regular market research to ensure that customers are happy with the level of service being received (complaints can be used to improve existing systems).
In conclusion, therefore, quality of service will depend upon the quality of staff, the quality and quantity of physical resources and the amount of money (capital) I have put into the business.
Staff will affect quality in many ways. Firstly, if they have been poorly trained or do not have the right attitude towards customers, customers can be lost and as a result of this, the business will lose money. These customers which have bad experiences may also tell friends and family about them which will result in the company gaining a bad reputation.
The importance of monitoring and reviewing business performance:
1. Complying with legal requirements:
There are a few important legislation and issues to be aware of, such as the sale of goods and consumer rights, equal pay, race relation, sex discrimination, the data protection act 1998, health and safety law and employment legislation.
The sale of goods and consumer rights:
A contract is a legal document that states and explains a formal agreement between two different people or groups, or the agreement itself.
Equal pay:
The equal pay act (1970) is an act to prevent discrimination as regards to terms and conditions of employment between men and women.
Race relation:
The race relation’s act (1976) is an act to prevent discrimination on the grounds of race. The act is mainly in relation to race, colour, nationality, ethnic and national origin in the fields of employment, the provision of goods and services, education and public functions.
Sex discrimination:
The sex discrimination act (1975) is an act to protect men and women from discrimination on the grounds of gender. The act is mainly in relation to employment, training and education.
Data protection act 1998:
The data protection act (1998) is an act to provide a legal basis and allow the privacy and protection of data of individuals. The act places restrictions on organisations which collect data which can identify a person.
Health and safety law:
Health and safety at work act (1974) is an act to set basic principles which must be followed by both employees and employers to help ensure a safe working environment.
A healthy and safe environment will improve job satisfaction and also customer satisfaction.
Employment legislation:
Working time directive is a collection of regulations concerning hours of work, designed to protect the health and safety of workers. Key features are the limiting maximum length of a working week to 48 hours in 7 days, and a minimum rest period of 11 hours in each 24 hours.
Section 3: Financial management in business
Financial management is essential for the survival of the business. It must be ensured that there is an adequate balance between cash inflows and outflows; if outflows exceed the cash inflow, more money is leaving the business than is coming in. If this is not fixed, the business will begin to make a loss, and become in debt. If the debt becomes too great, it may lead to the liquidation and ultimately the failure of the business. To ensure a reasonable profit is made, I will carry out adequate research and planning to ensure there is a reasonable balance between costs and revenue.
Start-up and Running costs:
There are four types of costs which need to be examined when considering the start-up of the business: Start-up, variable, discretionary and fixed costs.
Approximate start-up costs of equipment:
Approximate running costs of equiptment:
It is essential to examine the fixed costs of the business closely, as they are un-negotiable…. Etc/ (Look in the Book and write a bit about fixed costs) Why are they important etc..
Fixed costs
Wages/Salaries £65,000
Licenses £2000
Training £3000
Maintenance £2000
Insurance £5000
Staff Uniform £200
Rent/Lease £25,000
Sundries £500
Advertising £1000
Electricity £3500
Gas £200
Phone £200
Internet £100
Water £200
total £107,000
Variable Costs
Wages £10,000
Stock £40,000
Training £10,000
Music Entertainment £150,000
total £210,000
Profitability and Liquidity:
It is very important to monitor the financial performance to ensure the business is making a profit. Liquidity handles the cash of the business and without cash, the business cannot survive where as profitability is only necessary when the business is stable and doing well.
The factors, which affect profitability will in a way, also affect liquidity. The factors, which concern profitability are those that make up the profit (sales revenue – costs). The things that affect liquidity are the current assets compared to the current liabilities.
Profitability comes from the profit being accessed through net profit margins and gross profit margins. It is important because it shows how efficiently the business is generating profits from sales and should be monitored because we want to ensure we are generating high profits from our sales and not just working hard selling, but making no profit.
Contribution:
Contribution is important for my business as it looks at the performance of each area of my business. It can highlight what sections are successful in a business, what costs or prices could be improved, and if the weaker sections of the business are needed.
Cashflow forecast:
This is a key account for business, and without one, a business is unlikely to know what is happening – and how much money is available. A cash flow forecast shows when money is going in and out of the business, whereas the profit and loss account would show when the costs are earned.
(cashflow diagram)
When looking at my cash flow, cash outflow more or less matches my running costs for the first year. Considering my business will find it difficult during the first few months, my cash inflow is less, and due to my opening balance for the year being zero, my business will be in debt for the first seven months. Therefore I must consider getting an overdraft, which would alter my profit and loss account figures. So my closing balance total of over £60,000, which may decrease after paying off overdrafts.
There are many factors acting on my cash flow, which are:
- Customers and sales
- Cost of stock
- Cost of entertainment
- Advertising
- Staff and training
This means my cash flow forecast, therefore is an estimation of whether or not I will be in debt. This will make me aware of when there could be a shortage of money.
Break-even:
A break-even chart is another crucial document for my business, as it tells the business how many products need to be sold, before it begins to make profit, or break-even. It calculates the costs of overheads, the cost per unit, and price of the product together to see how many customers they are. A basic formula for manually doing it would be:
The next page will show my original break even chart, of what my costs are likely to be etc, along with a profit, and a costs & revenues graph.
My break-even spreadsheet shows that in order for my business to make a profit, I will need approximately 17,000 customers to make over half a million pounds in sales.
It is possible to change the amount needed by doing three things:
- Reducing the cost of overheads
- Altering the cost of sales per unit
- Increasing the price
Changing overheads:
By changing my overheads, not as many customers will be needed, as there are fewer costs to be paid. In the example, my overheads are £90,000, and this results in my business only requiring 14,000 customers. This is better for my business as it will mean less workload on staff to satisfy customer needs in the business.
Changing Cost of sales per unit:
The cost of sales per unit can be changed, by getting cheaper suppliers. By doing this, the customers needed for my business to break even would only be 12000, and if I were to get 17,000 customers as planned, I would make a profit of £37,500. Getting a lower price from suppliers will not only save money on stock, but would result in a higher profit margin on each service sold.
Changing price per unit:
Changing price per unit not only affects the amount of customers needed, but also the sales revenue. In my business, I need 27,000 customers in order to make £1,000 profit. The higher the price the fewer consumers required to make a profit, although the higher the price, the possibly customers. For example, the prices should not be made too high for customers, as they may stop coming or find a cheaper place to go instead (i.e. competitors), which may lead to the failure business.
Gross profit margin:
The gross profit margin tells us how much profit we are making from every £100 of sales. The higher the figure the better. 40% is a normal target. Above 40% is very good.
When we make sales. Sales staff could be given 2 types of targets:
- A target for items or number of items to sell
- A target for maintaining profit margins which are linked to the amount of discount that staff can give customers. Every time we give a big discount we reduce gross margins.
Net profit margin:
The net profit margin shows net profit as a percentage of sales. A low net profit margin shows that we have not controlled our overheads (fixed costs).
Wages:
Wages can be reduced by making employees work fewer hours, in addition to this, the business could invest in computerised systems, an example of this would be stock control, this action would to some extent decrease the out going wages by a certain percentage. To further reduce business the expenditure of the business through wages, would be to reduce the number of staff, this undertaking has many complications mostly affecting customer service, to over come this situation, a plausible solution may be for the business to set a maximum number of working hours for each employee, this solution may be further improved by only having a certain number of employees working during specific time periods, e.g. lunch time.
Advertising:
Advertising is a very expensive process in any business and allows the business to easily reach a vast audience and increase awareness of a product. If successful, more money should be made through sales revenue than spent on the advertising campaign.
Advertisements can be carried out on television, at the cinema, on the radio, on posters, in newspapers, in magazines, and on the Internet.
The advertising for my business will mainly be informative to let the consumers know the availability of the product, its function and purpose and to inform the consumers about the characteristics of the product. In my case, it will be to inform consumers that the pub/restaurant will be opening and what it will be like.
In order for this advert to be effective, it must reach and appeal to the target audience. Therefore, I have decided to advertise my business on posters and in local newspapers. Posters will be placed around the Birmingham University, student homes/halls of residence and around the area of the pub/restaurant. This will encourage many students and local residents to visit upon the open day for a good first impression and experience. These customers will most likely then tell their friends and family about the new business and will encourage them to come to see for themselves. If their first visit is a good one, they will become repeat customers and this will therefore lead to the business gaining a good reputation.
The last thing I must ensure when creating my advertisements is that they are decent, fair and legal. Any complaints by customers can lead to the investigation of the advert and it could, as a result be banned.
Section 4: The Use of Software to aid Decision-making
ICT and the use of software can improve my business in difference ways, such as job-efficiency, improving communications, and decision-making.
The types of software I would find useful for my business are as follows:
- Spreadsheets
- Databases
- Word Processing
- Specialist software
- The Internet
- E-mail
- Video Conferencing
Spreadsheets:
Spreadsheets are ideal for the financial side of the business, as it can use formulae to work out averages, percentages and sums. It is good for making balance sheets, profit and loss accounts, contribution accounts, break-even charts and for cash flow forecasting. One of the most common spreadsheet software is Microsoft Excel, as it is accessible and extremely easy to use.
It is much more time efficient to make a break-even chart on a spreadsheet, as it not only can make calculations, but also produce graphs and many other diagrams. If done by hand, a lot more time would be taken up and if mistakes were made, it would either not be presentable or the project would have to be started over again, which would therefore take much more time.
Spreadsheets can be used for the following in my business:
- Break even charts
- Cash flow forecasts
- Profit and Loss accounts
- Stock level analysis
- Contribution accounts
- Budgets
Word-processors
Word processing is extremely useful for many businesses. It can easily be used to produce documents, such as letters, memos and reports. It can also be used for contacting people, such as employees, suppliers, shareholders and customers. By using word-processors, you will get a very professional and presentable look to all documents produced with it.
Word-processors can be used for the following in my business:
- Memos
- Letters and Faxes
- Contracts
- Reports
- Email messages
- Leaflets
Databases
Storing data is very important for all businesses. It is needed for keeping sales receipts, staff information, and suppliers’ notes. If all this data is not kept on the computer, everything has to be stored by hard copy. Each document has to be filed in an organized fashion so that they are easy to find. This would take up a lot of time and also space, in the way that each would have to be stored in a filing cabinet. Someone would also have to be employed to make sure everything is in order. Files can easily be misplaced or lost like this and it is much better if there is a back up file stored on the computer in a database. Having all information on a computer in a database has many advantages, such as everything becomes far easier to find and access. Microsoft Access is the most common example of database software.
The Internet
The Internet is extremely helpful in many businesses. Most use it to advertise, send emails, for video conferencing and to sell and buy products.
My business may be advertised on the Internet by making a website. This will contain relevant information for customers such as the address, opening times, entertainment evenings etc. There could even be a place for members to join so that they can be informed about when the next bands are playing etc. This would definitely increase the number of customers, popularity and recognition of the business. The internet would most certainly be a good method of communicating to suppliers, customers and employees, as it is extremely fast and accessible. If my business expanded, the internet could also be used for videoconferencing.
With regard to costs, internet is extremely cheap to set up.
Specialist Software
For many businesses, specialist software may be needed to improve the quality or efficiency of a program, such as product design, graphic design, and simulation.
SAGE is one of the products, which I think may be beneficial to my business. The many features of this product allow the business to manage itself financially, by controlling suppliers, customers, products, accounts and finances. It not only saves time, but also saves money.
The features of this package include:
- Tracking and controlling bank accounts
- Produces sales and purchase ledgers
- Analyses accounts
- Records and analysis customer and supplier information
- Produces VAT returns
- Produces invoices
- Helps with credit control
- Provides reminders, alerts and ‘to-do’ lists
- E-banking ready (can do banking online)
- In-built currency calculator
- Integrates with Microsoft Office
- Can help with stock management
The cost of the package could save the business quite a bit of money in finding an accountant, or financial co-ordinate, and it could also mean that any employee could be trained to use it, offering many opportunities. On the other hand, it would most likely be very expensive to buy and train employees.
Data Protection and Health and Safety issues
When using ICT in my business, I need to ensure legal issues are followed, such as data protection, health and safety issues, and confidentiality whilst dealing with customer information.
The data protection act (1998) is an act to provide a legal basis and allow the privacy and protection of data of individuals. The act places restrictions on organisations which collect data which can identify a person. The data Protection Act must be followed at all times by my business when handling data.
Health and safety at work act (1974) is an act to set basic principles which must be followed by both employees and employers to help ensure a safe working environment. A healthy and safe environment will improve job satisfaction and also customer satisfaction.
The health and safety issues I must cover will be restricting the use of computers in a business. Here I will make sure employees have at least a 15-minute break, for every 45 minutes on a computer. The user of the computer must also have a comfortable, upright chair and have the screen at the correct distance away. The mouse and keyboard will also have to be a suitable height. Going through these precautions will prevent any injuries that may occur, such as back, eye or wrist problems.
Safety issues would include having well-ventilated rooms, regular electrical checks and ensuring wires are out of the way of all users, to prevent them from tripping over. These simple processes can easily be put into action, and have an immediate effect on the business and as a result, my employees will be safe from these easily avoided accidents.
In conclusion, when getting an ICT system, I must consider how useful will be in my business, whether or not I will need to upgrade/replace the software and how much training will be required for employees to use the software. I feel that by using these ICT applications, my business will be more in order. However, problems with these applications must also be thought through, such as the loss of data or computer failure/errors, and how easily they can be sorted out.