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GE2402 English For Business Communication - Business Plan - Cafe Hong Kong Loves

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Dick Wai Sin

on 29 October 2013

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Transcript of GE2402 English For Business Communication - Business Plan - Cafe Hong Kong Loves

Increasing operation cost
Cafe Hong Kong Loves
Our Business
Our target customers:
A stylish 'cultural' cafe
Aims to reflect the cultural vibrancy of Hong Kong through our signature handmade desserts
Our Inspiration
Our similarities:
2) located at commercial / tourist areas
3) A high-class cafe
1) Contains social enterprise elements
Overview
Cost Analysis
Andy
Dorothy
Jael
Jeffrey
Jess
Nathan
GE2402 T24
Tentative location: Central
Estimated rental cost:
$200,000 / month
Fixed Cost: Rent
Two Teams of Employees
Shifting (Day & Night)
Fixed Cost: Basic Salary
Why Central? It is the 2nd highest rental cost location among Asia*.
*Source:
http://www.cushwake.com/cwglobal/jsp/kcReportDetail.jsp?Country=GLOBAL&Language=EN&catId=100003&pId=c45300003p
Best location to meet our targeted customers (visitors and high-income working group)
Reasons for choosing Central
"Synergy Effect"
SOHO and LAN Kwai fong (concentration of pubs and relaxation dining)
Concentration of high value-added customers
Variable Cost: Raw Materials
Variable Cost:
Overtime & Part-time Salary
Profit Analysis
Potential Problems & Solutions
Fixed Cost: Utilities
Industry Analysis
Conclusion
The End
Q & A session
Keen Competition
Risk of Economic downturn
Limited Budget - Marketing
(cc) photo by medhead on Flickr
External Factors
Internal Factors
Recruiting suitable employees
Training of unskilled workers
The Society : Inflationary Environment*
Increasing Operation Cost
Keen Competition
Do's
NON-PRICE COMPETITION
Solutions
Products - fusion desserts
Environment - cultural cafe
Service - Friendly service
Find our own market position (uniqueness)
Dont's
PRICE COMPETITION
Don't reduce our price (destroy our market position)
Our potential competitors:
low social support elderly
(referred by social services)
underemployed teenagers with a passion for making desserts
(open hiring)
How to complete with our major competitors and survive in the market?
Also lower-priced substitutes:
Leaf Dessert
Cafe industry is:
Trends
Growing in
Value
Volume
Value of Bars, coffee shops receipts increase
Source: Report on Quarterly Survey of Restaurant Receipts and Purchases Q3 2012, Census and Statistics Department, Hong Kong Special Administrative Region
Volume of bar, coffee shop receipts increase
Source: Report on Quarterly Survey of Restaurant Receipts and Purchases Q3 2012, Census and Statistics Department, Hong Kong Special Administrative Region
Competitive Position
Profitability Analysis
Competitive: There are many cafes offering similar product & service. Hence, a café can not charge a price that is dramatically different from competitors.
In Central, there are many cafes, including Hard Rock café, petite amanda
Monopolistic : Different cafés is differentiated by their characteristics.
Hence, a successful café can charge a higher price than competitors without losing all of the customers
Gross profit ratio=Gross profit ÷ Net sales(Indicate the portion of profit in sales)
The higher the ratio, the higher profits from sales
Return on equity=Net sales ÷ Average stockholders’ equity
The higher the ratio, the higher return on investment.
The café industry
Is
lucrative
Source: Statistics New Zealand
Market structure: Monopolistic Competition
In 2011, among all districts in Hong Kong,
Central and Western district has second largest number of
Labor working in food and beverage service
Shop in food and beverage service industry
Source:Table E010 : Number of establishments and persons engaged (other than those in the Civil Service) analysed by industry division and District Council district,Census and Statistics Department, Hong Kong Special Administrative Region
Our Business Strategy
Blue Ocean Strategy
Red Ocean: Known / Developed Market Place
Blue Ocean: Undeveloped Market Place
Develop a new market by setting our own market position (uniqueness)
Way to survive:
Economic Downturn
Characteristics of Coffee & Desserts:
Possible ways to recuit suitable employees
1) Cooperate with social organizations
e.g. The Hong Kong Jockey Club Charities Trust funding: "Elder-Friendly Employment Practice" (EFEP)
1 season: train more than 100 elderly
Source: http://www.hkjc.org.cn/eng/about/activity_club_full.asp?in_file=/chinese/news/news_2010052925306.htm
Difficulties on recuiting suitable employees
As a Social Enterprise, we aims to...
Hire Marginalized workers
to provide them with job opportunities and training in order to increase their competitiveness in the society.
How can we locate these workers?
Possible ways to recuit suitable employees
2) Cooperate with Hong Kong Government
e.g. Labor Department

“the Youth Pre-employment Training Programme and Youth Work Experience and Training Scheme” (YPTP&YWETS)
for young school leavers aged 15 to 24
Limited budget for Marketing
High Set up Cost
NO extra money for advertising & promotion
Solutions
Use capital-saving marketing medium
e.g. Openrice.com
Hong Kong Tourism Board
Facebook
Our plan:
Part-time staffs (variable
cost)
Each team consists of:
Hourly rate: $40 / hour*
Fixed Salaries Expense:
Working Hours per day for 1 employee: 7 Hours
Total Salary for a month: $40 x 7 hours x 30 days
= $8,400
For Marginalized Workers,
Water and Sewage Charges
For Manager,
Total Salary for a month = $16,000
Electricity
Solutions:
Salary expense for 1 Team = $15,000 + ($8,400 x 7 staff)
= $73,800
Total Expense = $57,000 x 2 Teams
General Service Tariff
a) Basic Charge
= $147,600
"Unit" in this rate table shall mean one kilowatt-hour (kWh) of electricity.
Estimated electricity bills:
Total electricity units = 8500
Total electricity bills = 5000x0.934 +3500x0.925
*Coffee shop has a 30% discount on sewage charges payable

Year 1:
Earn social profit
Estimated sewage charges =$1.87x 700 cubic metres x0.7
=$916.3
Water Charges = $4.58 x 450 cubic metre
=$2061
"From a shop to a brand"
According to Water Supplies Department,
*Give us a chance to invest in our business plan*
•Overtime: $50/hour
•Min. overtime hours to 3
•Take up equally by employees
= $8571
•Part-time salary expense:
•5 x $40 x 4 hrs x 30 days
e.g. Membership Program
Understand customers' spending behavior
Chic
Extract more Consumer Surplus by providing special offers (Consume more)

Classy interior design with representative objects from each era
Cultural
Showcase of HK's cultural diversity
*Tourists feel welcomed
*Locals feel proud of their Cantonese heritage
Price setting
Expected sales on coffee:
$40x 300cups x30 = 360,000
Coffee: $40
Desserts: $50
Expected total revenue:
$585,000
The only cafe...
Caring
People are our greatest assets.
Elderly: Stories to tell
Young adults: Stories to create, and here is that place
According to Hong Kong Electric:
•Part-time: $40/hour
•5 workers
•4 hours/day
First stop for hungry tourists (+ eager to learn about local culture)
As a social enterprise
Tentative distributions of our sales
= $24,000/month
Stories told and stories created; history and creativity co-exist
Estimated average spending per customer:
Expected sales on desserts:
$50x 150pieces x30 =225,000
(Every hour we sell 25 cups of coffee & 12.5 pieces of desserts) (Business hours: 7am-9pm)
Profit Calculations
Estimated Profit margin
$136,352 / 585,000 = 23%
Profit earned on each dollar of sales revenue
High when compared to our competitors (Starbucks 11% *)
Tentative Income Statement
*Source: Starbucks Corporation Profit Margin Quarterly http://ycharts.com/companies/SBUX/profit_margin
Reason for high take-away ratio:
Time is precious to office workers
Tend to consume in office
NOT a necessity
Economic Recession : Demand
Characteristics of High-class market:
Demand
positively
related to economic environment
Economic Downturn : Shift to lower-priced substitutes
What could we do?
Customer's Loyalty
Customer's Loyalty increases, Revenue stability increases
How to use the least amount of money to generate the biggest market effort?
Training of unskilled workers
Marginalized workers that we employed
Are Unskilled
How can we train them to be capable workers?
Solutions
Pre-job training
Invite industry professionals from the cafe industry to provide training on marginalized workers
On-job training
Cafe managers continue to instruct and evaulate employee's performance & working ability
3Cs
Calculations
Coffee Bean: 270 kg x $110 = $ 29,700
Egg: 4500 units x $2 = $ 9,000
Milk: 600 litres x $13 = $ 7,800
Sugar: 70 kg x $ 100 = $ 700
Fruit: 150 kg x $20 = $ 3,000
Cream: 225 litres x $44 = $9,900
Take-away cutlery: 5400 sets x $1 = $ 5,400
Monthly expense:
= $65,500
* The minimum wage rate imposed by law is $28 / hour
*Inflation rate (consumer prices): world average 5% (2011 est.)
Rental cost
Raw materials
Salary
How to tackle with increasing cost?
Solutions
Increase our market power
Economies of Scale
Increasing output, lowering average cost
Average cost
decreasing
Funding we need
3 months rent deposit = $ 600,000
Operation fund (For the first 6 months operation) = $ 2,700,000
Fund for cafe decoration = $ 800,000
Total amount we need
= $4.1 million
Our 5-year plan at a glance
Year 1 2 3 4 5
Provide job opportunities and training to marginalized workers

Year 2:
Earn economic profit
Revenues > Expenses

Year 3:
Vertical Expansion
Expand our business ( cooperation with famous cafes)

Year 4 & 5:
Horizontal Expansion
Set up more branches
Take-away cutlery: $1 / set
(~1200 sq. ft)
Full transcript