The Green and Clean Kuwait Group (GCKG), is a McDonald’s CSR company incorporated under the local company act of Kuwait. The company has US$ 10 million paid-up capital with headquarters in Kuwait city. It is comprised of a skilled technical and professional working force as well as a dynamic board of management. GCKG is made up of corporate, residential, industrial, and pubic customers like municipals with an annual turnover of US$10 billion in 2011.
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In the global arena, the environment has turned into the major focus of the global communities because environmental degradation could generate ecological imbalance and hamper socio-economic development all over the world Owing to this fact, the United Nations has taken intuitive for global negotiation. Kuwait is an integral part of global awareness for environmental and ecological sustainability. Global warming has also drawn significant attention of the government and local administration such that they have both taken three-layered waste management projects at the central and local level that incorporate a municipal solid waste management program, a material recovery facility, and an anaerobic digestion process (Al-Salem and Lettieri, 2009). Under such a scenario, the corporate houses in Kuwait have kept their highest priority on environmental issues as part of their corporate social responsibility where the multinational corporation McDonald’s would like to invest.
Although GCKG is a privately owned company, profit is not its main target, rather its mission is to maximize the resource values through waste management while reducing the environmental hazards and impact of global warming in a way that would improve the national economy and the environment making the company prosper.
GCKG strives to bring Kuwait to the level of western nations in as far as its environmental awareness is concerned. This will be achieved by reducing its emulation of greenhouse gases and waste management and placing it in a suitable position for the upcoming global convention for global warming.
The proposed business initiative will operate in the Kuwaiti market, chiefly targeting all the branches of McDonald’s Corporation. It also has plans to place several composting bins outside the stores where the corporation will throw away its leftover vegetables. When the vegetables will turn into fertilizers, Green and Clean Kuwait Group will routinely send trucks to collect those fertilizers to the farmers, so that they could buy them at cheaper prices.
The proprietors of Green and Clean Kuwait Group resolved that the organizational structure would be simple because the functional and management aspects of the system were to remain easy to comprehend. However, with all this in place, they also have to make sure that all departments can coordinate their operations by following directives from the superiors including managers to satisfy McDonald’s Corporation and the customers. The subsequent figure demonstrates the company structure of Green and Clean Kuwait Group more elaborately.
The Green and Clean Kuwait Group (GCKG) has specialized operations in environmental and ecological technology. As an initiative of the CSR project of McDonald’s Corporation, it is tasked with introducing and implementing an innovative approach that would reduce the environmental hazards by producing organic fertilizers generated from the food wastes of McDonald’s’ outlets. GCKG would like to setup compose bins outside every McDonald’s outlet in Kuwait where the waste would be gathered and then transported to a factory outside the city. From here, the food and vegetable wastes would be turned into organic fertilizer. The GCKG will also develop a network of organic vegetable producers who will supply green products for McDonald’s at a cheap price in exchange for organic fertilizer.
Zafar (2012) pointed out that Kuwait including other GCC and MEENA countries generate around 150 million tons of solid waste per year and one-third of the quantity comes from foods and vegetable which are used to landfill and discharge greenhouse gases into the open air. Scott (2011) pointed out that increasing health awareness, rising waste disposal costs, and food safety legislation is the reason behind growing foods and vegetable waste. In Kuwait such wastes kept on the land, fill and pollute the environment with tremendous health risks. To conduct a successful business with food waste management, it is essential to generate an inventory of food waste and then decide on a cost-effective solution for recycling with a benchmark indicator of the outcomes and their market price.
There are several processes for food and vegetable waste recycling options, for the instance the ‘cone composing system’ which is a popular, cost-effective, and time-worthy solution for food waste including meat and other protein, bones, and vegetable remains It converts them into their original compounds like water and carbon dioxide. These green cones are manufactured from recycled plastic by use of a solar power system along with a basket and movable inner cone that functions to eliminate greenhouse gases and separates the compounds in a form, which is easily consumable for the plants and trees. Thus, the compost can be transported to the selected farms to manure the plants, and at the same time, it could be packaged into bags for marketing. This process is very cost-effective but may require permission from the local environmental authority for compliance with residential regulations.
The project aims to support the corporate social responsibility program of the McDonalds Corporation with a sustainable process of producing organic fertilizer from the waste food and vegetable of McDonald’s and to distribute them to the farmers who are interested in supplying organic vegetables to the company. The project would generate a huge scope of employment opportunities and be involved in developing people’s awareness of global warming and ecological hazards. By doing so GCKG would create value for its stakeholders and contribute to reducing the environmental degradation of the state of Kuwait which is an integral part of the company’s mission statement.
The project is aimed at reducing greenhouse gas emissions through advanced technology, integrating organic materials management strategies in Kuwait with waste composting bins, trucks, haulers, waste processors, gas generating set, boilers, and 1 master fertilizer with a conveyer and packing line that would produce 5000 MT of organic fertilizer per year. It is predicted that the project could be feasible from the commercial and ecological viewpoint, seeing that GCKG is striving for ecological sustainability in Kuwait, and McDonald’s is eager to demonstrate its CSR concerns in the country. The joint effort would therefore be a representation of the environmental awareness in this region.
GCKG has previous working experience with the municipal waste management project in Kuwait. It also has a strong network with the non-profit nongovernmental organizations working in Kuwait. The company has a compelling outsourcing set-up with the Asian emerging nations like Bangladesh, India, and Sri Lanka for low-cost workforce supply and this is mainly because GCKG has broad global connections in the field of technology supply. With all this in mind, it is clear that GCKG has ample financial and physical resources to implement a project of this magnitude.
Kuwait is the pioneer of the parliamentary form of government which promotes women’s participation in the GCC region. With its rising economic growth and social progress, it was placed at 4th position in the Human development index of UNDP that pointed to the reasonable stage of development in the scale of life expectancy, education, and living standard of the people. The economy of Kuwaiti is mostly dependable on the oil and petrochemical sector, although the government is emphasizing improving its non-oil sectors including agricultural development. The latter is not that reliable since the climate of the country is not favorable enough to turn the country into being self-dependent for its food supply. 75% of its water supply comes from distillation or import. According to the statistics of 2010, the country has a population of 2.9 million, and the total working force of the country consists of 35% local people, and the rest of them are foreign employees (BTI, 2012).
According to The World Bank (2012), the environment of Kuwait is to a great extent business-friendly because within a very short time it has done remarkable progress in ensuring a corporate responsive atmosphere; the following graph shows how Kuwait and comparative nations rank in the ease of doing business –
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The Green and Clean Kuwait Group (GCKG) will be operating in the Kuwaiti market, and the targeted customers would be the farmers. When it comes to the nature and characteristics of the market, it is important to state that as the soil quality of the country is not so good for agriculture, there will be a high demand for organic fertilizers among the customers. However, to assess the nature and characteristics of the market, it is also essential to assess the purchasing power parity of the customers to roughly identify the extent to which the customers would be able to afford the products of GCKG. According to Index Mundi (2012), the purchasing power has varied in different years as suggested in the table below: –
|Year||Purchasing Power Parity In Kuwait (Based on GDP)||Percentage Variation|
|1990 –||41.6410||-23.380 percent|
|1991 –||25.4360||-38.920 percent|
|1992 –||39.2380||54.260 percent|
|1993 –||53.6430||36.710 percent|
|1994 –||59.4990||10.920 percent|
|1995 –||61.5750||3.490 percent|
|1996 –||63.1260||2.520 percent|
|1997 –||65.830||4.280 percent|
|1998 –||69.0120||4.830 percent|
|1999 –||68.7820||-0.330 percent|
|2000 –||70.360||2.290 percent|
|2001 –||72.4310||2.940 percent|
|2002 –||75.6980||4.510 percent|
|2003 –||90.7430||19.880 percent|
|2004 –||99.1550||9.270 percent|
|2005 –||110.5420||11.480 percent|
|2006 –||120.120||8.660 percent|
|2007 –||129.1160||7.490 percent|
|2008 –||138.5350||7.290 percent|
|2009 –||132.7850||-4.150 percent|
|2010 –||138.8930||4.600 percent|
Table 1: Purchasing power parity in Kuwait (twenty years comparison). Source: Index Mundi (2012).
The purchasing power parity of the customers in Kuwait is graphically represented below –
The Green and Clean Kuwait Group (GCKG) will start its business by focusing on all the stores of McDonald’s in Kuwait. Initially, it will sell the fertilizers only to the farmers from whom McDonald buys its raw materials; however, after a few years, it would also target external farmers from the whole country. Nevertheless, it is highly essential to assess the demographic configuration of the country before entering the market; the following table shows the demographic features of Kuwait –
|Demographic features of Kuwait|
|Total inhabitants||2646314 in 2012 estimation|
|Zero to fourteen year old||25.8 percent (men 348816 & women 321565)|
|Fifteen to sixty-four year old||72.2 percent (men 1153433 & women 720392)|
|Sixty-five year old and above||2 percent (men 25443 & women 25979)|
|The total average age of the population||28.5 yrs in 2011 estimation|
|Men: the average age||29.8 yrs|
|Women: the average age||26.3 yrs|
|Inhabitants growth rate||1.883 percent in 2011 projection|
|Birth- rate||20.96 births per thousand inhabitants|
|Death- rate||2.13 deaths per thousand inhabitants|
|Below fifteen years||1.08 man per woman|
|Fifteen to sixty-four years||1.6 man per woman|
|Sixty-five years and above||0.96 man per woman|
|Literacy||94.4 percent men and 91 percent women|
Table 2: Demographic features of Kuwait. Source: Self- generated from Index Mundi (2012).
While starting the business, it is important for the Green and Clean Kuwait Group (GCKG) to make sure that it has the appropriate preparations and competencies to serve people from every ethnic background; however, the table below illustrates the ethnic and the religious groups present in the country:
|– Ethnic Groups –|
|Other Arab||35 percent|
|South Asian||9 percent|
|– Religions –|
|Muslim (authorized percentage)||85 percent (among which Sunni 70 percent and Shia 30 percent)|
|Other (comprising Christian, Hindu, Parsi)||15 percent|
Table 3: Religious and Ethnic Groups in Kuwait. Source: Self- generated from Index Mundi (2012).
Prerequisites and Assumptions
Being socially responsible is at the heart of the Green and Clean Kuwait Group’s business because it aims to generate profit only by recycling waste matters into fertilizers. However, it would enhance its corporate social responsibility by creating awareness among communities through special programs and informing them about the benefits of using recycled items for nature. After a couple of years of establishment, it would also carry out expansion programs throughout the country to achieve its aim to create a greener Kuwait. Conversely, GCKG has plans to collaborate with a few primary schools in the country to educate the kids about the benefits of cultivating with organic fertilizers and motivating them towards promoting recycling.
The objective of this project is to develop a process by December 2015 through which organic fertilizer is produced after being recycled from the waste food and vegetables of McDonald’s and then distributed to the farmers, who are interested in supplying organic vegetables to the company. It projects that it will recycle 78480 units of waste by then. The Green and Clean Kuwait Group (GCKG) expects to increase its business operating profit from $326,273.0 in 2013 to $1,807,500 by December 2015.
The marketing objective of Green and Clean Kuwait Group (GCKG) is to expand its business by targeting new farmers (apart from those who supply McDonald’s only), with the explicit aim to attain a 25% augmentation in total-sales that would represent an additional $50448 in profits by 2014; to attain this marketing objective of increasing the customer-base, GCKG will undertake many strategies. These strategies could include advertising through different feasible media. The table below assesses the suitability of different advertising methods that are necessary to achieve the marketing objective.
|Choice of advertising methods||Assessing the feasibility of choosing the advertising methods|
|Advertising through television||Deighton, Henderson, and Neslin (1994) stated that television campaigns are expected to be the best media to attract people of all ages, including middle-aged men and women spending their leisure, or working people watching TV on a Saturday night. Deighton, Henderson, and Neslin (1994) also affirmed that this form of the campaign would also be effective for the young generation aging from 20 to 35 as well as the youngsters as they are the majority of the population to watch television. Arguably, the Green and Clean Kuwait Group could get more opportunities to exhibit their creativity through TV campaigns besides reaching mass farmers at the same time. However, this media is not so feasible because it requires a huge amount of investment and at the initial stage, spending so much would not be possible for the company.|
|Advertising through print media||Newspaper is one of the most essential campaigning media for any company to come to capture the attention of the masses; the Green and Clean Kuwait Group will start and continue a paid circular advertising together with descriptions of benefits of using recycled products. Moreover, the business also wants to come up with press kits, brochures, and posters for the farmers.|
|Radio advertising||The advertisement of the GCKG must also go through radio-advertising, as this form of advertisement will better address those busy farmers who, for example, hear the radio while working on fields; besides, radio-advertising would develop potential-outcomes for the campaign with a sense of flexibility and this can also have a good impression on the audience with help of good scripts and slogans.|
|Online advertising||This form of advertising will include web marketing, as well as search engine optimization (SEO), advertisement through social networking sites, website development, blogs, and e-mails; additionally, by advertising through Google +, Foursquare, Twitter, Facebook, Myspace, or Hi5, GCKG could get a better arena where further public awareness can arise. This advertising will definitely be successful based on the fact that the individuals in networking communities “trust” each other – so, they would come up to appreciate GCKG’s initiatives if another person appreciates it.|
|Outdoor advertising||According to Deighton, Henderson, and Neslin (1994), outdoor advertising can be a great form of marketing to attract great contributions as well as to attain a huge customer base; this may include setting up billboards at busy streets beside farmlands, poultries, fisheries, rural places, vegetation fields, or busy bazaars to attract an increasing number of farmers to buy the products at cheaper prices.|
|Special campaigns & others||GCKC could also undertake other forms of advertising, such as promoting through magazines, sponsoring concerts, and sporting events|
Table 1: – Choosing advertising methods to help achieve the marketing objective. Source: Self- generated.
The financial objective of Green and Clean Kuwait Group is to become a market leader and expand its business in GCC countries after three years of its operation; however, it expects to increase its yearly profit from 18.0% to 25.830% within the fiscal year 2015.
Corporate Social Responsibility Objective
The CSR objective of the Green and Clean Kuwait Group (GCKG) is to recycle 78480 units of waste by 2015 and as a result, lessen the environmental hazards and impacts of global warming on the environment. The establishment of this program by McDonald’s would also avail many employment opportunities to the community and improve the economic standing of Kuwait as a whole.
Brealey & Myers (2002) stated that operational or tactical objectives are either short-term or limited aims that are prepared to achieve the ultimate goal. In addition Hitt, Ireland & Hoskisson (2001) argued that operational objectives concentrate on some characteristic of the business process that is accountable for changing the position of the business. By introducing its fertilizer in the existing market in Kuwait, it will increase its business operating profit from $326,273.0 in 2013 to $1,807,500 by December 2015; at the same time, it has a plan to spend 1.5% of its operating income on market research and to increase investment for the promotional activities to aware 50% of its target customer by 2014.
Project Stakeholders and Stakeholder Analysis
Stakeholders are in the true sense of the matter the life force of the project and their views and opinions have a direct bearing on the project’s standing. As such, the project will be deemed successful if the stakeholders collectively believe in its objectives and targets. Once any of the groups identified as stakeholders seems to be questioning the project’s purpose and plan, or that they no longer share what the project signifies or what its outputs should be, then the entire project is at risk of falling apart. The successful running of the project’s activities relies heavily on the proper management of the stakeholders; how efficiently the correlation between the different people and policies in place are run. Sometimes, particular groups of stakeholders in a project who feel that their more significant than the rest, will take for granted the extent to which their jurisdiction lies and attempt to direct the running of the project. In other cases, stakeholders who are vital in the running of the project pull out in the course of the project while others may amend their views or opinions on principal issues. All these scenarios are normal and expected and therefore cannot really be avoided. However, they must be managed appropriately. This can be done by maintaining a steady flow of communication with the most important stakeholders so that one is aware of whatever they have folded up in their sleeves.
In the beginning, GCKG will sell the fertilizers only to the farmers from whom McDonald’s obtains its raw materials (like vegetables and fruits); however, GCKG will sell those fertilizers for a cheaper price to the targeted customers.
The main supplier for the Green and Clean Kuwait Group (GCKG) would be McDonald’s Corporation; to be specific; GCKG will collect leftover vegetables from the 336 branches of McDonald’s in Kuwait.
The Green and Clean Kuwait Group will need to outsource some services and equipment from other service providers. The other suppliers include providers of compost bins that will be strategically located at the various McDonald’s outlets, trucks to transport the leftovers to the recycling plant, and all other essential equipment required for the proper functioning and implementation of the entire process.
There are numerous competitors throughout the Kuwaiti recycling industry and the industry is fairly competitive because of the presence of well- established companies such as Metal & Recycling Company, the Green Target Company, Bin- Saleem Environmental Recycling, Kuwait Waste Collection, and Recycling Company, and Trust Cleaning Company.
The government agencies responsible for regulating the disposal and management of waste will be at hand to ensure that the proper procedures are followed throughout the entire process and project as a whole. They will also be available to support the project because it will have a direct implication on its activities.
Environmental Watch Dogs
These are the non-governmental organizations that carry out the same activities as their sister agencies in the government as far as the regulation and proper handling and disposal of waste are concerned. They promote the preservation of nature and the environment and are at task to make sure all organizations that directly have an impact on it, follow the guidelines.
The Green and Clean Kuwait Group will be a company that will require the support of the community for it to register all-round success. The consumers of the products at the McDonalds outlets are the main reason for the formation of the project. Without them, there would be no objective in the first place. They are also beneficiaries in the whole cycle because they get to enjoy a clean environment and even better products from the outlets as the farmers produce better quality and quantity crops resulting from utilizing fertilizers. GCKG will also be a source of employment opportunities for many in the locality.
|Name||Work Area||Stakeholder Type||Impact by/on project |
Requirements Success Criteria
|Consumers||Farmers supplying produce to McDonald’s outlets and receiving fertilizers at a subsidized cost||End-user||Key consumers of the recycled waste into fertilizers and bloodline of the project|
|Suppliers||The main supplier of refuse being the 336 McDonalds outlets all over Kuwait||Client||This is the source from where the objective of the project is drawn. More refuse, more production of fertilizers.|
|Service Providers||providers of compost bins that will be strategically located at the various McDonalds outlets, trucks to transport the leftovers to the recycling plant, and all other essential equipment||Client||Ensure the efficient running of project processes and that the goals are achieved.|
|Competitors||Other well-established companies in the same industry||Competitor||Determine the pace of the industry and progress of the project|
|Government Agencies||responsible for regulating the disposal and management of waste |
ensure the proper procedures are followed throughout the entire process and project as a whole
|Support group||Ensure policies and regulations in place are adhered to. Controls act as a check mechanism for the project’s activities.|
|Environmental Watch Dogs||Non-governmental organizations that regulate and ensure proper handling and disposal of waste. They promote the preservation of nature and the environment and are at task to make sure all organizations that directly have an impact on it, follow the guidelines.||Support group||Provide a platform where issues related to proper waste disposal can be addressed.|
|The Community||Those in the same locale as the McDonald Outlets |
Kuwait as a country
|End-user||Beneficiaries through job creation, better-maintained environment due to proper waste disposal.|
Table 2: – Stakeholder Need Analysis.
Legal and Ethical Considerations
To guarantee the success of the project, the Green and Clean Kuwait Group (GCKG) will need to fully conform to the laws and regulations of Kuwait. Besides, the management of the company will ensure that it deliberates on the Companies Act to make sure the relevant laws that pertain to the country’s license and labor laws adhere. The issues that relate to rights of the employees, their welfare including medical allowances, employment laws for minimum wage and wages in general, constitutional embargoes on discrimination when it comes to employment opportunities, the Consumer Protection Act, and environmental laws will have to be respected as well. Most importantly, the company will have to ensure the environmental safety issue. Being a company that is involving the community, it will with time set up some form of giving back to society through charity by setting up a fund that meets the needs of a particularly disadvantaged group of society or offering to donate and build, for example, a hospital. This way it will meet its societal obligations.
The project schedule provides a mechanism through which the progress of the project can be evaluated, shared with other stakeholders, and how the different activities therein can be synchronized. It also pinpoints the crucial targets that have to be achieved together with their respective dates. The significant stakeholders should be involved in the project scheduling process in the initial development stages so as to the initial schedule to ensure conformity right from the beginning.
Table 3: – Project Schedule.
|Stage #||Stage name||Description of Activities||Responsibility||Resources required||Milestone?||Start||Finish|
|1||Planning||Project definition, objectives, stakeholders||All key stakeholders||Y||Jan-12||Mar-12|
|2||Definition of Products and Services||Identifying the products and services||Production Department||Y||Jan-12||Feb-12|
|3||Resourcing/Financing||Drawing up the budget and financial projections for the project||Administration and Finance Department||Y||Feb-12||Mar-12|
|4||Attending to Legal Requirements||Legal and ethical requirements||Administration and Finance Department||Y||Mar-12||Apr-12|
|5||Business Project Documentation||Documentation of project results||Administration and Finance Department||Y||Apr-12||Jun-12|
|6||Account Requirements||Cost indications consistent with the project schedule||All key stakeholders||Funding from project||Y||Apr-12||May-12|
|7||Advertising||Meeting the marketing objectives of the business aspect of the project||Marketing Department||Y||May-12||Jun-12|
|8||Recruitment and Selection||Human resource||Human Resource Department||Y||Jun-12||Jul-12|
|9||Launch of business||The official start of business activities||All key stakeholders||Y||Jul-12||Aug-12|
|10||Availability of Products and Services in the market||Availability of Products and Services in the market||Marketing department||Y||Jul-12||Aug-12|
Resources and Budget
Human Resource Planning
The human resource aspect is vital for the effective running of project processes and activities. Human Resource planning is very important because this is where all the manpower to run the project activities is based. These resources need to be scheduled so that people are accessible when their input for a particular task is required. The roles and responsibilities must be clearly defined for each position with precise boundaries indicated. This ensures that each job description is well-defined, there is a measure in place to monitor the quality of the job done, and that the workload in relation to the manpower available is balanced. The project manager is tasked with ascertaining the qualifications and experience required for the different project phases. They should also be able to recruit suitable project staff on behalf of the project and organize training if it is a prerequisite. They are also responsible for the welfare of their staff and keeping the staff updated on any modifications in the project, recognize and getting to the bottom of any problem that may arise.
|Personnel Requirements||Number Required||Responsibilities|
|Project Manager||1||Supervises and manages overall business operations/activities. |
In charge of the supervision of all staff. Give job orders for the day
|Head of Production||1||In charge of product scheduling, production process, and deliverables.|
|Head of Marketing||1||In charge of promotion and selling of the company products|
|Head of Human Resource||1||Responsible for addressing the hiring and training aspect of the project with directives from the project manager.|
|Head of Administration and Finance||1||Responsible for the financial statement; cash flow statements, trial balance, ledger, journals, and all activities related to accounting procedures|
|Compost Waste Recycle Consultant||1||Tasked with providing expert opinion and advice as well as guidelines on the process of recycling the organic waste into fertilizer|
|McDonald’s Representative||1||Acts as a link between the project and the McDonald administration|
|Driver||1||Transportation and maintain mobility|
|Accountant/Cashier||1||Responsible for sales, receipts and vouchers and day to the daily sales report|
Table 5 –The Human Resource Table.
The Green and Clean Kuwait Company design the following financial plan to assess the prospect of the business and estimate the return on investment; however, maximizing profits is not the prime intention of this company as the main purpose of this business to consider corporate social responsibility to develop green Kuwait. Besides, this project needs additional fund since it focuses on the integrated marketing campaign and green program to aware the target customer regarding the importance of recycling waste and use of fertilizer; however, the financial projections include a Pro-forma profit and loss statement, cash flow statement, the balance sheet for the year 2013 to 2015, and break-even analysis.
Key financial indicators
McDonald’s Corporation and Green and Clean Kuwait Company will jointly coordinate this project where McDonald’s will invest $1 million or $1,000,000.0 for this project as it has a CSR program. However, the following table provides more information about the total budget, assets, long-term liabilities, etc.
|Start-up Costs||Key indicators|
|Start-up Expenses to Fund||$92,180.0|
|Start-up Assets to Fund||$907,820.0|
|Total Funding Required||$1,000,000.0|
|Non-cash Assets from Start-up||$826,920.0|
|Cash Requirements from Start-up||$80,900.0|
|Cash Balance on Starting Date||$80,900.0|
|Total Planned Investment||$150,000.0|
|Loss at Start-up (Start-up Expenses)||($92,180.0)|
|Total Capital and Liabilities||$907,820.0|
Table 4: Startup costs for Green and Clean Kuwait Company. Source: Self-generated.
Projected Profit And Loss of Green and Clean Kuwait Company
In the projected profit and loss account, Green and Clean Kuwait Company can make $1,121,168 sales revenue from sales in the first year, and the expenses incurred in the year is $672,345, which indicates the net profit for the project. On the other hand, the company will reach the break-even point within the first year and the profit will increase year by year; however, the following table gives more information in this regard-
|Pro Forma Profit and Loss|
|Year||2013 ($)||2014 ($)||2015 ($)|
|Direct Cost of Sales||122,550.0||297,853.0||612,688.0|
|Other Costs of Goods||0||0||0|
|Total Cost of Sales||122,550.0||297,853.0||612,688v|
|Gross Margin %||89.070%||88.340%||88.010%|
|Sales and Marketing and Other Expenses||12,000.0||24,000.0||48,000.0|
|Maintanence and Repair||4,800.0||9,600||20,000.0|
|Sales and Marketing and Other Expenses||12,000.0||24,000.0||48,000.0|
|Maintanence and Repair||4,800.0||9,600||20,000.0|
|Total Operating Expenses||672,345||1,400,259.0||2,688,730.0|
|Profit Before Interest and Taxes||326,273.0||856,956.0||1,807,500.0|
Table 1: Projected Profit And Loss of Green and Clean Kuwait Company for the year 2013 to 2015. Source: Self-generated.
Projected Cash Flow Statement of The Green and Clean Kuwait Company
From the following cash flow statement, it was observed that Green and Clean Kuwait Company would be able to generate positive cash flow in the beginning year though initial set-up costs can surpass the expectation level of the management team. In the first year of operation, this recycling company can generate a positive flow of cash since the revenue overlaps the cost and the flow will increase at a good pace, for instance –
|Pro Forma Cash Flow|
|Year||2013 ($)||2014 ($)||2015 ($)|
|Cash from Operations|
|Cash from Receivables||542,495.0||1,366,516.0||2,768,762.0|
|Subtotal Cash from Operations||990,962.0||2,388,544.0||4,812,329.0|
|Expenditures from Operations|
|Long-term Liabilities Principal Repayment||60,859.0||65,258.0||69,976.0|
|Purchase Long-term Assets||0||800,000.0||1,600,000|
|Subtotal Cash Spent||812,388.0||2,504,901.0||4,816,633.0|
|Additional Cash Spent|
|Long-term Liabilities Principal Repayment||60,859.0||65,258.0||69,976.0|
|Purchase Long-term Assets||0||800,000.0||1,600,000|
|Subtotal Cash Spent||812,388.0||2,504,901.0||4,816,633|
|Net Cash Flow||178,574.0||(116,357.0)||(4,303.0)|
Table 2: Projected Cash Flow Statement of Green and Clean Kuwait Company for the year 2013 to 2015. Source: Self-generated.
Projected balance Sheet of Green and Clean Kuwait Company
In the projected balance sheet, the Green and Clean Kuwait Company will have $1,064,710 total liabilities and capital a profit of in the first year while the second year after the initial setup of this company, it will be $1,608,796.0; however, the following table shows that assets and liabilities are increasing –
|Pro Forma Balance Sheet|
|Other Current Assets||00||00||00|
|Total Current Assets||403,174.0||472,644.0||799,597.0|
|Total Long-term Assets||661,536.0||1,136,152.0||2,090,768.0|
|Liabilities and Capital||2013||2014||2015|
|Total Liabilities and Capital||1,064,710.0||1,608,796.0||2,890,365.0|
Table 1: Projected Balance Sheet of Green and Clean Kuwait Company for the year 2013 to 2015. Source: Self-generated.
Break-even Analysis for Green and Clean Kuwait Company
According to the projected profit and loss account, Green and Clean Kuwait Company anticipated that this company would be able to reach a breakeven point within six months of its operation because it will generate $201,792 in profits. From the financial projections for the next three years (2013 to 2015), it can be argued that the Green and Clean Kuwait Company would reach at break-even point if it can sell 2180 units/ per month or 26160 units/ per year fertilizer, otherwise, it has to face unexpected losses; however, the subsequent figure demonstrates the break-even point of the Green and Clean Kuwait Company –
Green and Clean Kuwait Company intended to establish this business because it will help farmers, and general people to develop a green environment. However, this project has several strong points to develop a green image and to dominate the market with its products and services, such as –
- Recycled products of Green and Clean Kuwait Company will assist farmers to reduce production costs because this company will sell fertilizer at a comparatively lower price;
- Mahdi & Majda (2002, p.2) stated that Soils of Kuwait are mostly sandy with limited organic matter; therefore, farmers will be benefited by using alternate fertilizer, which will increase soil productivity along with soil quality;
- At the same time, the products of this company will change the financial position of the farmers because they will get better quantity and quality of crops;
- The employees of this company have a long experience to deal with such a big project;
- Besides, the industries will get cost-effective pollution abatement technology (Nagavallemma, Wani, Lacroix & Padmaja 2006, p.15);
- It has the financial capability to ensure the success of the project, and provide top-quality, recycled material to the customer;
- Supply chain management systems and innovative ideas of the human resources are also potential strengths of the company.
Some possible weaknesses of this company will be –
- Due to high start-up costs, the management of this company has to face some limitations to manage its assets and human resources effectively to increase the production level at minimal operating costs;
- At the initial stage, it will not be possible for Green and Clean Kuwait Company to introduce online purchasing or e-commerce facilities;
Green and Clean Kuwait Company will start this business because it is a subject of enormous opportunities –
- The management team of this company has already conducted a market survey and expected that fertilizer from vegetable waste will be popular to the farmers and it will help the nation boosting the rural economy;
- It has the opportunity to expand its business inside and outside of Kuwait;
- It will develop an online order system and door-to-door delivery facilities within a very short period to increase loyal customer base;
- The purchasing power of buyers decreased all over the world; so, the competitive pricing structure will enhance business;
- It has the opportunity to contribute to reducing environmental hazards and global warming;
- Green and Clean Kuwait Company has bright prospect to diversify its product line;
- This company will get more offers from other companies to recycle their waste;
- Successful completion of this project will influence McDonald’s to invest more to start the same project in other Arabian nation;
There are many external threats, such as –
- Kuwait is one of the highest producers of waste in the world; therefore, their many renowned competitors, such as Metal and Recycling Company, Kuwait Waste Collection And Recycling Company (KWCR), Trust Cleaning Co. are the main threat for the Green and Clean Kuwait Company. However, it will build a good relationship with customers to save the company from future competition;
- Lack of consciousness of the target customer many create a serious crisis for this company;
- Other threats for this company are volatility in the price of raw materials, increase in the price of equipment and remuneration of employees, inflation rates, lack of market research, and global financial crisis, strategic plans of the competitors, threats of new entrants, and so on.
The viability of the project
Brealey & Myers (2002) and Hitt, Ireland & Hoskisson (2001) argued that costs and benefits analysis takes into account the amount of monetary gain; however, the project considers prospective if it achieves higher CBR –
The success of the projects = Financial benefits – financial costs
However, the projected profit and loss account along with the balance sheet makes it clear that this project is highly profitable and it also ensures corporate social responsibility.
Return on investment (ROI) of GCK
|ROI||Return on investment (%) = Net profit ($) / Investment ($) × 100|
|ROI||= (201,792.00 / 1000000) x 100 |
|= (603,000 / 1000000) |
|= (1,319,458.0 / 1000000) |
Table 2: Return on Investment of Green and Clean Kuwait Company. Source: Self-generated.
Return on investment of Green and Clean Kuwait Company will satisfactorily increase year by year, which indicates the fact that McDonald’s Green project is a prospective project for this recycling company.
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