Most of the businesses are run based on one or a combination of the three basic business strategies, namely cost, product and focus strategies. For a business that aims to be successful on product differentiation, an ideal market should be the one that contains people who can afford to buy the kind of product that offers unique qualities over other similar products.
In this particular case, we rely on offering high quality pizza to the customers while providing them with excellent service and fast response time. It has an inherent pre-requisite that potential customers are supposed to be willing to pay for the added advantages, as everything in business has some cost associated with it. This can be possible when there are no other competitors at all, or when there are existing pizza businesses, but the customers are ready to try a new one with a positive difference in quality and service.
The third one is the realistic scenario, as there is apparently no town in this world which has pizza lovers but no pizza businesses. It reflects the actual situation that pizza makers have mushroomed everywhere and so new comers need to be ready to compete with many existing pizza businesses and be able to grab customer attention with some sort of differentiation.
As our main strategy is to go with product differentiation in terms of high quality product with excellent customer service, the ideal market is the one with high population who eats pizzas on regular basis and so are interested to pay for a tasty and quality item. However, the prospects of business success will be more when this can be done while maintaining the prices in comparable range. London seems to be a favourite place for the proposed pizza venture due to various factors that will be elaborated in further sections. To be simple, the three main reasons for choosing London in particular are its high population, high pizza consumption and the desire of customers, as it is known by many customer reviews, to find a new pizza avenue that offers taste and quality.
Though London is very familiar for this company, it is essential to focus on some details so as to have a clear idea on present business scope and plans. To start with, the initial focus will be on London in general and then on the particular place in London that is better suited for the proposed business.
London
London, the capital city of United Kingdom, is the largest city in Europe with an area of 610 square miles and a population of 7.5 million as per 2005 census (Moving to London 1). Out of the total 33 districts and major cities in London, some important places are West End, East London, Central London, East End, South London, City of London, Bloomsbury, North London, Docklands and West London. Apart from Central and West London, North London is relatively well developed than South London (Moving to London 1).
Developed residential areas and number of businesses in a place that is somewhat away from the main business area of Central London can be an advantage with North London if one of our kinds chooses to start a business while comparing the costs of business set up and consumer buying capacity. North London encompasses many towns called boroughs such as Barnet, Harrow, Camden, Hackney, Haringey and Islington (Moving to London 1).
London Borough of Camden
Camden seems to be an ideal location for many of the following reasons.
- Its population of 207,800 people with a density of 9,496/km2, spread over 21.8 sq.km (London Borough 1).
- Than many other places in London, its population is dominated by whites, major pizza consumers, (73.2%), followed by South Asians (10.4%), Afro-Caribbean (8.3%) and Chinese (1.8%) (London Borough 1).
- Also, this area has as many as 16 major residential areas/towns with nine schools and two university level institutions (London Borough 1).
- Importantly, it is surrounded by six developed boroughs, namely City of London, Westminster, Brent, Islington, Haringey and Barnet (London 1).
Hence, the main factor that can be fulfilled by choosing Camden is potentially large
and affording customer base, as people who live in and around this developed area are mainly employees or business persons who can pay for quality, taste and time. Additionally, as it is somewhat away from the Central London, the cost of business set up can be reasonably minimized.
Pizza Businesses in London and Camden
There are as many as 200 pizza centres all over London, of which over 70 are owned by Pizza Hut and an almost equal number are owned by Pizza express (Restaurants 1).
They offer different varieties of pizzas with both vegetable and meat toppings. The prices of dinner and also of single pizza at ten best rated pizza restaurants in UK are given below.
(“Best Pizza” 1).
While the prices at Pizza Hut vary between £ 6.99 and £ 12.99, pizza prices at Pizza Express range between £ 5.90 and £ 10.95 (Menus 1; View 1).
Only two units of the top ten restaurants, namely Eco and The Soho Pizzeria, are located in Camden (“Pizza Delivery” 1). Nearly eight other pizza businesses present in Camden are either branches of the pizza hut, Domino’s pizza or some local pizza makers such as UK Pallet Collection (“Pizza Delivery” 1). Except for Napule, no other top ten restaurants have special home delivery menus.
Customer Views
Coming to customer opinions, most of the average customers see the top ten restaurants as very good hubs for a holiday dining, though some others visit them regularly (“Best Pizza” 2). The Popular opinion is that though restaurants such as pizza hut, Domino’s and pizza express offer a variety of pizzas for relatively cheaper prices, they lack the traditional Italian style of quality and taste in those pizzas and so prefer one of the top ten for occasionally dining as they offer Italian taste but with higher prices (“Best Pizza” 2).
Hence, it becomes imperative that the ability to offer a pizza with Italian kind of making at comparable prices to that of regular pizza hubs such as Pizza Hut can win customers on a large scale.
Target Markets for the Proposed Business
In the current business perspective, the places instead of population can be divided in to 3 categories: Schools, Businesses/offices and houses.
Firstly, there are 9 schools and two university level institutions in Camden. Proper marketing techniques can attract a good number of young customers from these places. Secondly, Camden is well developed with many government offices and considerable number of private businesses. Hence, a faster and reliable customer service can result in gaining some customers from this area, considering the fact that we will be offering high quality Italian kind of pizzas which are not available in this area. Thirdly, targeting households with special packages should be a main task so as to make our company a household name for pizza home delivery.
Marketing Objective for the First Year
The company aims at spreading its name in and around Camden in the first six months by delivering pizzas made of quality recipes that reflect the taste of traditional Italian pizzas, and will then further build up its reputation by continued and constantly improving quality service. The main focus will be on quality and taste, along with impeccable customer service. Also, a maximum delivery time of 45 minutes for destinations within 30 km range will be of prime importance, as we intend customers to rely on us for not only quality but also time maintenance. Thirty percent of the first year profits will be invested towards strengthening assets of the business and the same will be continued for the next three years.
Promotional Plan
The catch phrase for the promotional activity will be-“Italian Pizza – Awesome Quality at Normal Price”. It reflects product differentiation at relatively no extra price when compared to many other pizza makers.
Considering the population of Camden, nearly one fourth the number of people, that is 50,000 flyers will be made in three phases, 20,000 in the first round, 20,000 and 10,000 in the second and final rounds, respectively. To minimize the costs and to let people know through a flyer everything about our services, it is better to use a multi colour flyer that contains the brand’s name in the top with remaining page filled with the qualities of the pizza delivered and any discounts that will be offered.
Before deciding on promotional plan and discounts, it is necessary to estimate average pizza making cost based on the cost of its ingredients.
Flour: cost of 25kg flour bag = approx. 103.35 (4.13/kg) (Tobia 1).
Cost of 175 gm = £ 0.72
Cheese: approx. 1.5kg = £ 6.6 (3lbs = $ 9.99) (Costco Wholesale 1).
125 gm = £ 0.55
Pepperoni: 1 kg = £4.0; 40 gm = £ 0.16
Sauce: 1 kg = £ 2.5; 125g = £ 0.31
Box cost: £ 0.20 per pizza
Basic ingredients cost for each pizza = 0.72+0.55+0.16+0.31+0.20(box) = £ 1.94
The initial cost of pizza will be set at £ 7.00. Any additions will be made at extra charge.
As a promotional offer, 5 percent discount will be given on each sale of pizza for the first three months.
Apart from these, flyers will be distributed to households and offered at the cash counter. The flyer will work as a £ 5.00 or 10% discount coupon for the next order.
The cost of making and distributing the flyers, and other related expenses will be around £ 6,600. The campaign will go on vigorously for the first three months and the further course will be decided based on the review of progress then.
Cost and Time Division: Camden will be divided in to three divisions for advertising purpose and the contracted direct mail delivery agency will be asked to distribute flyers in one division for the first month and further distribution depends on previous advertisement’s response. Flyers will be made using A4 size, 150 gsm art papers using full colour on one side.
(Flat A4 1; Weaver 1)
A total of remaining 2000 copies will be kept at the pizza centre for in-house distribution.
An amount of £2800 (2 x 1400 per month) will be paid to a local popular news paper in two equal amounts for the first month biweekly advertisements (Sibya 1).
Staffing Requirements
The timings for the pizza house will be from morning 9am to midnight 1am throughout 7 days a week. Hence, regular employees for two work shifts of 8 hour each will be required.
As this is a new business and relies on prompt customer service and fast response, additional workforce will be required during peak times. The tentative staffing requirements will be considered for the first year, though changes may be made as per periodic reviews. As worker satisfaction is needed for better performance, they will be paid slightly above the average payment made to workers at other popular pizza businesses.
A brief summary of staffing requirements, working hours and wages can be seen as follows.
No. of shifts per day: 2 (8 hr each)
No. of regular employees per shift:
- 1 – to receive calls
- 1 – pizza making
- 1 – dish washing and cleaning
- 1 – shift manager
- 2 – delivery boys
Peak Hours:
For 3 hours during lunch time and 3 hours during dinner time: 2 part time delivery boys.
Part-time delivery boys will be required to have their own vehicles for delivery.
Initial wages: £ 4.50 for pizza maker & shift manager
£ 4.00 per hour for other regular workers (except delivery boys)
£ 3.50 per hour plus customer tips
Replacement workers at any time will not be calculated separately, as the total payments will be same with the same employee or a replacement for a particular position.
Monthly payments:
Total Salaries Payable each month = 2160 + 1920 + 1920+ 2160 + 3360 + 1260
= £ 12,780
The above mentioned table depicts only expected staff requirements and related salaries payable. However, reviews will be conducted each month or even earlier so as to adjust the staff as required by the business progress. Also, the average payments mentioned here are based on and slightly improved over the salaries that are paid to employees at certain pizza businesses such as the pizza hut (“Pizza Hut” 1). Also, the number of employees required for each shift has been calculated by observing existing demands and related workforce at a popular pizza business (Lindsay 1 & 2).
Management of Change with regards to Change in jobs of Existing Staff
As we want to transfer some of our existing staff in the manufacturing company to the proposed pizza business, certain factors pertaining to whom and how we can shift employees and how we can make them perform well in the new jobs.
Firstly, the ideal departments in our company from where we can select employees to be transferred to pizza business are the administration wing and/or marketing section. Workers from other departments are not well suited for the new business as manufacturing and service sectors are two different entities. For the pizza business, we need to hire well highly skilled and reliable chefs from outside who can stay with us for long time.
Coming to the manager post, a sincere employee from either the administration or preferably marketing section can be chosen. For the dish washer post, any trustworthy and active low waged worker can be taken from the company. Personnel from marketing section, those involved with customer service in particular, are the most suitable candidates for the customer call receiver positions. Full-time delivery boys can be any of our drivers with a satisfactory track record and the zeal to work hard.
Legally eligible school students with own vehicles are ideal for part-time job positions as their recruitment compared to regular workers will reduce additional costs for the business. As we give high preference to customer service, it becomes imperative to select suitable candidates who can work hard in their respective positions and help in the growth of our new business. Hence, adequate care is needed in their recruitment.
However, workers employed in our company may not be willing to enter the new jobs in a completely different business setting when there is no apparent profit to them. A forceful transfer may result in losing valuable workers and poor performance from workers. Hence, motivating them by one or the other means is an important issue.
Motivation for Workers
Pizza business is so competitive that attracting and retaining customers are highly challenging tasks, as there are number of alternative pizza centres that cater to the needs of a diverse population. Therefore, any flaw in implementing our very notion of providing high quality Italian type of pizzas with extraordinary customer service may lead to a severe setback for the total business future itself. Accordingly, employees in our pizza business, existing staff in particular, need to be inspired enough to work for the growth of this new business. They also need to be able to cope with unexpected heavy workloads and/or contingencies as it is a possible case with any new business.
Towards that end, workers can be motivated by different means such as effective leadership, provision of additional benefits etc. Offering each existing worker a bonus of £ 100 for every three months for the first year can be a useful option. Also, they will be allowed to eat in the restaurant itself during work hours so that they can save some money on food expenditure. Above all, existing workers whose houses are not too far from this pizza centre than the manufacturing company should be selected, as they may be more than willing to shift to the new job then. Moreover, no decrease in monthly earnings should occur because of this job change.
They may be assured of periodic hike in salaries in proportion with the potential growth of the new business. Any other huge financial provisions may lead to unwanted expenditure for the new business, as the pizza prices will not be increased for at least some period of time.
Team Work
The lack of emphasis on team work results in nothing but a disaster for any business. Moreover, our pizza delivery business is a perfect example for team work as co-ordination among workers starting from customer call receiving, pizza making to on time delivery is very essential. Without acquiring awareness and interest for team work, they may commit plenty of mistakes at each stage of the routine business. Hence, pre-work training is essential for them so as to make them comfortably work as a group.
Leadership
The founders obviously concentrate more on the new business in the initial days. However, it may not be possible for them to look after each and every minor issue as and when needed. Hence, all the workers need to be empowered and be able to take on the spot decisions when something unexpected happens pertaining to their routine work. Also, they have to be particularly educated on how to behave with diverse customers. Each employee should recognize the value of customer and should understand the fact that hospitality is as important as quality and taste.
Employees can be guided in this way through frequent observation and motivation of the top management. A useful option is to tell the shift manager not to merely supervise workers but try to interact with them and lead them towards performing team work. Owners also need to clearly and openly state a point that workers are allowed to take rightful decisions when necessary and when those decisions are in favour the business’s survival.
Some more important issues include giving free hand to the chefs for doing new experiments in pizza making and accepting reasonable mistakes of workers. However, a new pizza will be made available to the public only when it is thoroughly tested for taste and quality. Apart from these, both the shift manager and the owners should pay heed to worker apprehensions if any.
Financial Issues
A suitable business place in Camden can be hired for a rent of nearly £ 7000 p.a. (Restaurants 1). Hence, the rent payable for each month will be £ 583.33. Equipment expense is estimated at £ 5000 (Pizzeria 1).
The owner’s proposed investment is taken as £25,000 after considering the franchise expenses of various pizza restaurants in London.
Existing workers will be paid a bonus amount of 100 pounds for each trimester during the first year.
Start-up marketing expenses are expected at 6,600 pounds.
Start-up Investment
Owner’s equity: £ 20, 000
Loan: 0
Start-up Expenses
Professional fees: £ 1,500
Stationery: £ 1,000
Renovation: £ 2,000
Equipment = £ 5000
Marketing: £ 4,600 (remaining 2000 to be expensed in next two months)
Rent: £ 583
Insurance: £ 200 (2400 to be paid in twelve months)
Miscellaneous: £ 2000
Vehicles: brought from existing factory
Total Start-up expenses: 1500+1000+2000+4600+583+200+2000 + 5000= 16883
Remaining balance in the beginning: £ 8117
Monthly Cash Flows
The business will be expected to start by July 1st, 2009 and the monthly maintenance expenses have been estimated at £ 1000 after excluding the rent. As per market situation, the first month revenues on pizzas, breads and beverages is considered as 15,000 pounds which will be expected to show an average growth rate of 10 percent each month for the first sixth months and then remains somewhat stable for the remaining period of the first year.
Monthly payments: salaries + ingredient expenses (1.94 per each £ 7; i.e., 16.23%) + rent + insurance + maintenance and taxes + £ 1000 per each three months (100 bonus per each existing employee)
Forecast Income Statement for the year end by June 30, 2010.
Total expected revenues = £ 255,734.50
Total expenses (including taxes) = 230261.62
Net Income = £ 24,272.88
Forecast Balance Sheet
Assets
Equipment = £ 5000
Cash = £ 20,000
Accounts receivables = 255734.50
Accumulated depreciation = £ 600
Total Assets = £ 280134.5
Equity
Owner’s share + retained earnings = 25,000 + 24672.88 = £ 49872.88
Liabilities
Accounts payable = 230261.62
Assets = equity + liability = £ 49872.88 + 230261.62 = £ 280134.5
Explanation
Possible rental expenses, equipment costs, other expenses have been estimated based on observations on rental prices in Camden region and the business reports of other pizza businesses such as pizzeria and pizza hut. This data has been helpful in estimating the amount of business that can be carried out for one year period.
Accordingly, expenses have been calculated and potential remaining bank balance at the start of the business has been found out.
Based on expected sales and related expenses, possible revenues and payments have been calculated on a monthly basis for one year period. With this, the income statement has been prepared by taking revenues and expenses while excluding previous bank balance.
For the balance sheet, Assets = Equity + Liabilties
Assets = what the company owns
Equity = what the owner presently owns
Liabilities = what the company owes outside
Rental, insurance and taxes have been included in the expenses data.
For depreciation of the equipment purchased for £ 5000 in the beginning, the salvage value has been taken as £ 2000 after a life period of 5 years.
Depreciation = book value-salvage value / life period in years 5000 – 2000/5 = 600/yr
Hence, for one year forecast statement, the accumulated depreciation becomes 600 pounds.
By including all these details, assets have been mentioned with what the company has, equity has been entered with owner’s share and net profit in business, and then liabilities are the amount that is payable to others.
By using the equation, assets have equalled the sum of equity and liabilities, thereby authenticating the forecast statements.
Roles of People, Finance and Marketing in Business
These are mutually exclusive factors that are very essential for a business to be successful. To start with, manpower is needed at each stage of business. Firstly, the idea to start a venture may rise in the mind of a single person or may be the result of brainstorming in a group. Whatever it is, the need for people becomes evident at this very beginning phase. Without people, a business cannot be started, the scope cannot be predicted, and cannot sustain for long time.
Secondly, finance is a vital element either to start a new or to improvise an existing business. In general, no single person tends to invest solely in a business, rather prefers gathering financial sources from various corners so as to be secure in the business context. Likewise, every aspect in business runs around the matter of finance. Taking from employee wages to expanding overseas, financial resources and gains are the biggest advantages and motivators for business.
Finally, marketing has never been so important as it is today in this globalized world. People across the world have access to a wide array of companies that compete on similar products with almost similar characteristics. Hence, marketing plays a crucial role, as the company which employs strong marketing techniques over others becomes successful in capturing the market quickly and sustainably.
- People: In the business context, we can categorize people into four types. They are- employer, employee, manager, and shareholder/owner (The Role 1).
- Employer: He is the one who gives jobs to employees and look after the well being of a company. Inherently, this position has many responsibilities such as providing employees with a safe working environment, paying them salaries at par with applicable standards, maintaining the reputation of the company in front of competitors (The Role 1).
- Employee: Most of the people fall in this category. There are multiple positions and departments in which people render their paid services to various companies. Some of the departments include accounting, administration, marketing, research and analysis, sales, and production (The Role 1).
- Manager: Though the employer looks after the overall well being of a company, it is highly impossible for him monitor each and every department and employee. This is especially true in case of large companies. Hence, managers are appointed in various departments who supervise the availability and consumption of necessary resources and the performance of sub-ordinates (The Role 1).
- Shareholder/Owner: The minor difference between an employer and a owner is that an employer need not be an owner. An owner or shareholder owns total or a particular portion of the total shares of a company (The Role 1). He is seen as the main authority on whose decisions the very existence of the company may depend.
- Finance: With the evolution of new business trends in the world business arena, the role of finance has become increasingly important. Moreover, technological advancements have created multiple options to see a wider expansion of the functions of finance and financial analysts.
The main role of finance people revolves around maintaining a company’s activities in accordance with regional, national and/or international policies, analyze related pros and cons, and advise authorities and act on whatever is best for a company’s financial growth.
They include but not limited to areas such as tax and accounting procedures, enterprise resource planning, data warehouse maintenance etc (Role of Finance 1). Apart from traditional business activities of finance people, the ever increasing competition makes them search for new alternatives that give their companies an edge over their rivals in the market (Role of Finance 1).
- Marketing: Marketing specialists are mainly responsible for a company’s activities towards grabing customer attention. To be precise, their functions can be described as follows.
- Identifying: Marketing specialists remain constantly engaged in identifying and analyzing customer interests and requisites with regards to particular products/services (Nature and Role 1).
- Anticipating: Increasing competition has made product life cycles shorter, making even a very new product obsolete in no time. Accordingly, one has to anticipate the change in trends and the change in customer desires so as to introduce the most opt product for the customer (Nature and Role 1).
- Satisfying: Customer satisfaction is the main factor that decides the success or failure of a product. Marketing people use their analysis to help in creating products that will greatly satisfy customer demands (Nature and Role 1).
- Profitability: This is the ultimate goal of any business and marketing specialists help companies in achieving this through maintaining balance between customer requirements and profit margin.
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