Content
1. Introduction
2. Business ownership
3. Location
4. Target market
5. Division of labour
6. Promotion
7. Type of competition
8. Competition
9. Method to attract consumers
10. Budget
11. Conclusion
12. Price List
Introduction
The concept of opening this shop is because of economic recession. Public purchasing power is reduced. People tend to purchases less luxury and the demand of relatively cheaper goods and services will be more. Therefore, establishing a noodle shop can attract a lot of customers because its relatively cheaper price noodle is reasonably suitable for some middle-class. Besides, establishing a noodle shop is simple and the cost of running this is lower in comparison with running a big beverage. Though profit maximaization, can gain from this kind of shop. There are several partners come to join hand in running this business, the risk of running the shop can be shared.
Business Ownership
During the economic recession, starting up a firm is so risky. So we will decide to start up the business in the form of partnership.
A partnership means a relationship between persons carrying on a business to make profits or shares losses. The members often draw up an agreement, which outline the nature of the business and the rights and obligations of each member. In additiopn, the co-owners of partnership may jointly contribute capital to and share in the management of the business. The reasons of choosing this form of ownership are,
(1)Ease of organization
It is very easy and convenient for members to start up the business in the form of partnership. The organization process is very simple. The members only need to register with the Inland Revenue Department and pay a business registration fee. The business registration certificate will be given and can start the business.
(2)Low cost of organization
Since the legal for militias and requirements for starting up a partnership are simple and can handle by the members. The setup costs of a partnership are not required. Also, the setup costs involved are mainly for purchasing equipment and inventory. Depending on the nature and the size of business, the startup capital can be as low as several thousand dollars.
(3)Wide source of capital and risk sharing
With more than one owner in a partnership business, there are moraines to provide equity capital of the business and thus the financial risk associated with insolvency can be reduced.
(4)Better management
In a partnership, the management burden can be shared among the partners and the skills and expertise of each partner can complement those of the others. Also, division of work can be achieved which greatly improve the efficiency of the business.
(5)Close contact with employees
In addition to attractive salaries, commissions and other non-financial rewards partnership can maintain their morale and retain good employees. Moreover, partners also know the needs of our customers for whom we can provide suitable goods and services.
(6)Strong working/profit incentive
As partnership have unlimited liability, every partner is fully liable its debts if a partnership goes bankrupt. Therefore, partners are motivated to work efficiency and avoiding making losses.
Location
We decided to establish the noodles shop in Aberdeen Main Road. The reasons are as follow:
(1)Residential buildings
There are many residential buildings in Aberdeen Main Road, so that we can make a lot of consumers in it, especially the housewives.
(2)Industrial buildings
There are 2 major industrial buildings which are called FullAgarIndustrialBuilding and ShingDaoIndustrialBuilding. As they are near to our noodles shop,we can have many customers.
(3)Schools
There are 2 secondary schools in Aberdeen,such as PuiTakCanossianCollege and St.PeterSecondary School.During lunch time,students may go to our shop for lunch.
(4)Others
In Aberdeen,there are many sole proprietorssuch as music studio,stationary shops and shopping mall,e.g.ABBA Shopping Mall and JumboCenter.So that,we can earn money through the take-away service.
Target Market
Our mainly customers are housewives,students and industrial workers.Firstly,there are 2 secondary schools,except the summer holidays,the students will go out for lunch.As the price of foods in Aberdeen are relative expensive,we can attract many customers in lower price.During the tea-time,there are a lot of housewives since they have to buy food for dinner.Theyprefer to enjoy a high tea before shopping in the market.As a result,we can make profit in it.Also,there are industrial buildings near, so that we can earn money since we have take away service.
Division of Labour
As our shop is small in size and with its simple structure,we will not hire too many employees.Also,we decide to separate the working hours into 2 parts.One is lunchtime and the other is dinner. In the afternoon which is included lunch time and teatime,we will hire 6 labours. (include 2employees as a cook,2 employees in the dining area, 1 person in drinking preparation area and 1 is responsible to wash dishes.)At night, we will reduce one person who is working in the drink preparation area. As customers will not drink any coffee and tea at night in general, they are mainly drink soft drinks. About the division of labours for shareholders (i.e. the partnership),we decided to set a time-table for them to work and their duties are working as a cashier and supervisor.
The criteria of hiring employees are different as jobs nature is different.For example, in the drink preparation area,he should have more experience that at least 5 years.The workers in the dining areashould have 1-2 years experience,talkative and is better for them to live in Southernsince we can reduce to teach them and it is easier for them to adapt the working environment.
Promotion
We decided to use 3 methods:
(1)Leaflets
-separate to the Southern district.
(2)Posters
-stick them to different industries and shops.
(3)Free-trial
- During the open day, we will make the food to the consumers and it will be free of charge.
Type of competition
We are facing monopolistic competition. There are large number of buyers and sellers in the same district. We are not the only business selling noodles. We just have a small share of the total market. We have to face a sharp competition from rival business producing similar products. That is there are close substitutes in this district. We are the price searcher, we need to find a suitable price.
The effect on price and earning is uncertain, so we are not facing price competition only. We also engage in non-price competition. The non-price competition based on product quality differentiation, service differentiation, etc. Then we need to add extra expenditure to cost such as expenditure on promotion, better services, and good quality. So we can attract more customers.
Competition
Although there are too many foodshops in Aberdeen,such as,the fast food shops (include Café De Carol,McDonald’s and Pizza Hut,etc),the Chinese Restaurants (e.g.Kam Moon Lau Restaurant,Kam Tao Restaurant) and some noodles shops (Nam Kee Spring Roll Noodles Co.Ltd and Tse Kee Shan Lun Fishball Co.Ltd), we still have advantage in it.
Firstly,the fast food shops.Its products are unhealthy and oily.Students and children may get obesity easily when they ate too much this kind of food.
Secondly,the Chinese Restaurants.Their price is too high and turnover is low.So the people have to wait for a long time.As their lunch time is not long enough,they may not prefer to go to the restaurant during lunch time,especially the industrial workers and students.
Thirdly,the other noodles shops in Aberdeen.Although they have a standard quality,it is expensive.
* We have already put our price list at the end of the project.
To conclude,we can attract many customers and it will make profit. That is the reasons for us to run a noodle shop in Aberdeen.
Method to attract customers
As we are facing price and non-price competition,we have different method to attract more customers.
Firstly,our selling price of the noodles is low.This is our method to face price competition.Our noodles only cost about$10 each.It is cheap and many people can afford. This can attract students to come.They can have a meal at a lower price and can save money. Our economy are not very good now,many people want to save money.They will go to a cheaper shop to consume.So we can attract them.
Secondly,we have a service which we will deliver the noodles to customer’s home or working place.Some of the customers may not free to go out to have their meal,we can deliver to them.Such as the workers in shopping centers who need to keep an eye on the shop, they are not allowed to go out.It is very convenient for these customers.
Lastly,we have a longer business hour than the other shops in this district.We have our business from 11a.m to 12a.m.This is good for the people who come back late.Many people have to work until nighttime,they may feel hungry when they back home.
Also some people want to eat something in the night time.As we can see,there are not many noodles shop open until mid-night in this district.We can attract these customers also.
Budget
Cost Budget:
Advertisement (handbill 2000pcs) / $140Refrigerator(1 large and 1 small) / $12000
Furnace(boiling and gas) / $10300
Sink & drainage / $20000
Fine fighting appliance / $10000
Tables(5) and Chairs(25) / $900
Cash register / $5000
Shelves / $500
Drink preparation area expenses(include all the necessary items,e.g.the cold &hot water machine) / $10000
Brand / $1000
Decoration / $30000
Electricity(e.g. air-conditioner) / $10000
Business registration fee / $350
Utensils(e.g.bowl,chopsticks) / $1000
TOTAL / $111190
Monthly Expenses:
Rent / $25000Wages & salary / $56000
Electricity & drainage expenses / $30000
Fuel / $4000
Stock (e.g.drinks,food,etc) / $25000
Sundry expenses(e.g.maintenance,detergent) / $5000
TOTAL / $145000
Sales Budget:
Opearting hours: 11:00a.m-12:00a.m (13 working hours)
Busy hours
Suppose the stock turnover is 4 times per hour that means each customer stay about 15 mins to have their meals during the prime time.(We assume there are 15 people come to our shop in 15 minutes) So:
Lunch(12:00-2:00) / 15people x 4 times x 2 hrs / 120peopleTea Time(3:30-4:30) / 15people x 4 times x 1 hr / 60people
Dinner(7:00-8:00) / 15people x 4 times x 1 hr / 60people
TOTAL / 240people
Non-busy hours:
Suppose the stock turnover is 4 times also and 4 people come in 15 minutes.
4people x 4 times x 9 hrs =144people
Total customers a day 144 people +240people=384 people
Suppose
50%people buy the meal set→192 peoplex$15 / $2880
2%people only buy drinks
→8people x$5 / $40
5%people buy noodle with oyster sauce
→19 people x$21 / $399
43%people buy just 1 bowl of noodle
→165people x $12 / $1980
TOTAL / $5299
Take out sales:30people a day =30people x $12=$360
Drink sales:40people x $9=$360
Other sales(fresh vegetable)=$100
TOTAL AMOUNT OF MONTHLY SALES
=$(360+360+100+5299) x 30DAYS
=$183570
The amount is low because most of customers prefer to buy the meal set which include drinks/vegetables.TheMUV of buying a meal set is higher than the MUV of just buy a single bowl of noodle.
Capital budget:
Share of capital:
A / $271000/5=$54200B / $271000/5=$54200
C / $271000/5=$54200
D / $271000/5=$54200
E / $271000/5=$54200
Profit budget:
Monthly sales: $183570
Monthly expenses:$145000
Net monthly profit=$38570
Share of profit:
A / $38570/5=$7714B / $38570/5=$7714
C / $38570/5=$7714
D / $38570/5=$7714
E / $38570/5=$7714
Payback period (each of the partners):
Month / (Share of capital-Share of profit)January / $54200-$7714=$46486
February / $46480-$7714=$38772
March / $38772-$7714=$31058
April / $31058-$7714=$23344
May / $23344-$7714=$15630
June / $15630-$7714=$7916
July / $7916-(-$1856)=$9772
August / $9772-(-$1856)=$11628
September / $11628-$7714=$3914
October / $3914-$7714=($3800)
From the above table,the payback period is 10 months.
Because of the summer holiday,the customers who are students will drop. The amount of sales will have a little drop, say just 80% of the normal sales. Then the sales of July and August will be $183570 x 80% = $146856 and will have a little loss of $1856.
We can consider the following methods of generating funds:
(1)Borrow from commercial bank
(2)Borrow from partnership
(3)Trade Credit
In case,the AVC is lower than the MR that is,suffering losses. We may consider controlling the expenses more tighten.So that the whole set of cost curve will drop.We can achieve the break-even objective.
Conclusion
To conclude,we will establish a noodle shop in Aberdeen. Since there are many advantages, such as the location, population and stable supply of stock,we will set the noodles shop here.
Price list
Each of the following noodle=$12, Noodles with sauce= $21, Double favor =$18
Noodle in soup: Beef ball, Fish ball, Cuttle-fish ball, Spring roll,Dumping, Fish-skin Dumping, Won-ton, Beef, Beef triple, Strewed beef, Pork trotter, Chicken wing
Soft drinks $5 eachbottle
Hot drinks $8 Cold drinks $9
Milk tea, Coffee, Ovatin, Lemontea, Lemonwater, Chocolate, Soya bean milk
Fresh vegetable $8, Noodles in soup $5
Special price
–Meal set ~ one bowl of noodle+ drink/fresh vegetable = $15Just for stay here.
Extra $1 for take away service. Thank you and welcome.
Member list
6C
Lau Siu Kai
Lee Yan Yan
Choi Kwan Lok
Tang Chi Ching
Wong Ka Wai
28-6-2002