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its about restaurant and healthy food they serve as well as fast food in India how it works
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FRESH GARDENS RESTAURANT:
HEALTHY AND FRESH FAST FOOD
Ronald Esteban Moncada Ruiz
B0356PHPH0411
Presented as part of the requirement for the award of MBA at
University of Gloucestershire.
Supervisor: Dr. K V Shenai
November 2012
Acknowledgements
The development of this business proposal would not have been possible without
the support of my beloved parents, Milton and Luz Dary and my two younger
brothers Andres y Santiago who have helped me since I made the decision to
come to London. I would like to thank as well to my project tutors Dr. K V Shenai
and Professor Mr Mervin Sookum for their valuable teachings during the
realisation of this proposal.
I would like to thank specially to my girlfriend Diana whose love, support and
patience were fundamentals in getting to the end of this important stage of my life.
Additionally, I thank to my flatmates for their help, support and patience.
Finally, but more important I thank God who has given me the opportunity to be
here, to study and to met such a good people during my staying in London.
Table of Contents
Acknowledgements
Executive Summary
Chapter 1: Introduction 1
Chapter 2: The Business Concept 4
Chapter3: Feasibility 7
3.1 Market Research
3.2 Product Service Feasibility
3.3 Industry Feasibility
3.4 Market Feasibility
3.5 Organisational Feasibility
3.6 Financial Feasibility
3.7 Resource Requirement Evaluation
Chapter 4: Strategic Analysis and Business Model 30
4.1 Ansoff Matrix: Strategic Choice Analysis
4.2 Mckinsey 7 S Framework
4.3 Value Chain
4.4 Swot Analysis
4.5 Sources of Competitive Advantage and Sustainability
4.6 Selection of Strategies for Success
4.7 Development of Appropriate Business Model
Chapter 5: Business Plan 41
5.1 Overview of the company:
5.2 Business Plan Schedule
5.3 Critical Success/Failure Factors
References
Appendices
LIST OF TABLES
Table 1: Fresh Gardens Sales Forecast ................................................................. 23
Table 2: Fresh Gardens Cash Flows ..................................................................... 24
Table 3: Fresh Gardens Profit and Loss ................................................................ 25
Table 4: Fresh Gardens ROEI ............................................................................... 26
Table 5: Fresh Gardens Break Even Analysis....................................................... 27
Table 6: Fresh Gardens Salaries ............................................................................ 28
Table 7: Start-up Costs .......................................................................................... 47
Table 8: Activities and Schedule........................................................................... 49
LIST OF GRAPHS
Graph 1: Product Classification .............................................................................. 5
Graph 2: Acceptation of fast food ........................................................................... 9
Graph 3: Would you try fast food? ......................................................................... 9
Graph 4: Willingness to buy ................................................................................. 10
Graph 5: Quality .................................................................................................... 10
Graph 6: General thinking ..................................................................................... 11
Graph 7: Fast food market participation per cities. ............................................... 12
Graph 8: Consumption level for products. ............................................................ 13
Graph 9: Product life cycle. .................................................................................. 16
Graph 10: Fast Food Industry - Pestle................................................................... 19
Graph 11: Ansoff Matrix ....................................................................................... 31
Graph 12: Ansoff Matrix for Fresh Gardens ......................................................... 31
Graph 13: 7'S Framework for Fresh Gardens ....................................................... 33
Graph 14: Fresh Gardens SWOT .......................................................................... 35
Graph 15: Fresh Gardens Value Chain ................................................................. 36
Graph 16: Fresh Gardens Business Model ............................................................ 40
Graph 17: Fresh Gardens' Competitors ................................................................. 43
Graph 18: Fresh Gardens' Service Model ............................................................. 46
Graph 19: Gantt chart of Activities ....................................................................... 50
file:///C:\Users\ELSA%20MARIA\Desktop\BUSINESS_DEVELOPMENT_PROPOSAL_MBA3.docx%23_Toc339535679file:///C:\Users\ELSA%20MARIA\Desktop\BUSINESS_DEVELOPMENT_PROPOSAL_MBA3.docx%23_Toc339535680file:///C:\Users\ELSA%20MARIA\Desktop\BUSINESS_DEVELOPMENT_PROPOSAL_MBA3.docx%23_Toc339535681file:///C:\Users\ELSA%20MARIA\Desktop\BUSINESS_DEVELOPMENT_PROPOSAL_MBA3.docx%23_Toc339535683
Executive Summary
The Fast Food market in Colombia has been one of the most important and
profitable, because of its potential growth that despite of being much atomized,
people usually like to have a wide range of options. Bogota, as the main city is a
place in where most of the fast food chains are located offering different menus
under the same service concept: choosing the product, placing the order and then
waiting for it to be served. This represents disadvantage, as nowadays people
rather to have everything ready to take away. The idea of this business model is to
offer a different option of fast food shop in where the main emphasis will be the
freshness of the food, the importance of healthy and also the fact of have it ready
to eat. The company will start operations opening 2 shops in Bogota and its name
will be Fresh Gardens.
Fresh Gardens will be developed on a scenario of New company start-up as an
entrepreneur. This scenario is the appropriate one, as currently in Colombia there
is no business offering fresh and healthy food ready to eat; having that in mind, it
was necessary to make several initial assumptions in order to create a realistic
scenario of analysis.
The main purpose of this project is to generate a business plan that will supply a
growing demand for fresh and healthy food in Bogota, identifying the main
advantages, critical points of feasibility and also the economical resources needed
for the start-up of a company. Fresh Gardens will operate using a well developed
model from the big cities of the world such as New York or London in where the
coffee shops are an option for having lunch since the products offered are healthy
and ready to eat.
The segment of customer to which fresh gardens will focus its strategies is the
people aged between 20 to 35 years old, who are classified as socio-economical
level 4, 5 and 6, which means medium-high and high social level and represent
13.82% of Bogotas population.
Regarding to the strategy, Fresh Gardens will choose the differentiation as the
driver of its activities, where service, style and innovation will be the pillars for
the development of the company.
In order to identify the financial viability of the project some assumptions were
made:
It was estimated 5% growth for the market during the next 5 years as the
general trend has been 6%.
It has been estimated to sell 150 products per shop as an initial approach,
as the market is highly competitive.
The price will be 3 per deal.
Having in mind the above assumptions and according with the financial
assessment that was done for the project it was found that the initial investment
required will be 40.000 pounds that are going to be given 30% by the
entrepreneurs and 70% should be funded by a private investor; the other 26.200
pounds are going to be funded by a bank loan.
It will be offer a 27% of return over the initial investment having in mind that the
project offers an IRR of 27,52% and a Payback period of 2 years and 11.16
months.
This entire project aims to attract private investment, which is why a complete
strategic analysis and plan is developed through the chapters, giving realistic
close-up to all the factors that could affect the good performance of the business
when referring to internal and external environment.
1
Chapter 1: Introduction
1.1 Rationale for the business idea
The Fast Food market has been one of the most representatives in terms of
growth when talking about restaurants and food in Colombia. The trend in this
market has showed that despite it is a very atomized one, people like to have a
wide range of options offered under the model of fast food, where the simplicity
of the service does not affect the quality of this one or of the product served.
Colombia has been an appropriate scenario for establishing and developing new
models of fast food shops. As a result several companies have appeared over the
last 10 years offering products such as hamburgers, pizzas, crepes and
sandwiches. This evolution has been possible because of the influence of foreign
customs over the behaviour of native people in such a way that nowadays young
people and average adults (30-40 years old) prefer to have a take away lunch
rather than stay the lunch time sitting in.
Although there are many options for fast food places in Bogota, all of them have a
menu for people to choose the product, place the order and then wait for it to be
served, fact that means time-wasting for those that are in a hurry. The idea of the
business model proposed is to offer a different option of fast food shop in where
the main emphasis will be the freshness of the food, the importance of healthy and
also the fact of have it ready to eat.
As many young people have had the opportunity for going abroad and have a
touch of what is the trend in the big cities, the idea could be well accepted on the
market as nowadays people that works in offices, students and business people are
always attracted by the latest tendency that has been a success abroad; so that
combining a successful model from cities like London or New York with some of
the benefits that can be found on the Colombian market, it is possible to say that
this kind of business could be a really non-traditional proposal.
2
1.2 Scenario chosen
According with the research that has taken place before the selection of the idea
and also because of the experience and interest of being an entrepreneur, the
scenario under which the study and business development will be done is the
New company start-up as an entrepreneur. This scenario is the appropriate one
because there is no business like that working currently on the market and so,
several initial researches and assumptions are needed in order to have a real close
up to the feasibility of the business.
1.3 Aims and objectives of the work
The key aim of this work is to generate a business development proposal based on
a new idea. The business plan will help to identify the main advantages, critical
points, feasibility of the project, and sort and amount of resources needed for the
start-up of a company, on the basis of a reliable analysis and research about the
market and the economical, political and social context that could surround the
business. Another but not less important aim of this work is to give an explanation
about the project with all the variables that have a role into its execution so that it
could be presented to potential investors in order to have access to economical
support.
Objectives
Identify the feasibility of a fast food business in Bogota- Colombia.
Evaluate the market and future customers.
To analyze the business model, under a theoretical perspective using
managerial tools.
To make a decision about the investment required for the project.
Give a detailed view about the benefits of the business.
3
1.4 Structure of the work
The business proposal here presented will be divided by chapters according with
the process of decision, research, analysis and assessment that will be developed.
Chapter 2 will be about the business concept in general, which means a
description about the idea, product, the potential market, mission and vision
statements; Chapter 3 will be the one in where the research process and analysis
of data will take place, in order to evaluate the industry, competitors, financial
requirements as well as forecasting according with the market information
gathered so that it will be possible to conclude about the resources that will be
needed for starting the business. Chapter 4 will be a strategic evaluation of the
business model, so that a managerial analysis will be made in order to determine
issues such as competitive advantage, strategies for being successful on the
market, internal analysis of the boundaries of the business as well as the
identification of the opportunities and strengths over competitors. Finally, the
chapter 5 will offer a plan for the development of the business idea, presenting a
schedule of times and activities, as so an assessment about the circumstances or
variables that could mean success or failure for the business idea.
4
Chapter 2: The Business Concept
The business idea here presented is about the development of a new model of fast
food shop in Colombia that will be called Fresh Gardens. The purpose is to offer
food that should be prepared the same day of its selling but this one has to be
ready and packed by the time that the customer would want to have it. There will
be offered a set of products such as sandwiches, salads, fruits and also, and as an
especial feature, natural and freshly prepared juice, taking advantage of the
diverse range of fruits that Colombia is able to produce. The importance and clue
of this idea is to sell the food under the concept of freshness and healthy so that it
would be possible to compete against those others fast food chains that sell fast
food that is not healthy when people eat it too much.
2.1 Business Opportunity
According with the global trend, Colombians, especially those that are located on
important cities, are getting more interested in going out for a meal, fact that has
encouraged the market growth, allowing to the fast food chains have more
incomes and then invest more opening shops in different other cities. According
with statistics, last year the growth on sales was of more than 25% (Datos.com,
2011) compared with that of the year before.
One of the most important factors that are influencing growth on this sector is the
lack of time that is affecting people. Another important variable is the stable
growth of the Colombian economy which has been nearly 5%, this situation
improves the buying power of the inhabitants so that they feel free of spending
money eating out.
Fresh gardens is a new and different option because its principal objective is to
offer a portfolio of sandwiches, salads and fruits made with the freshest products
day by day. Those products will be displayed on the shop in different showcases
so that the customers will be free to have whatever they want and then take it to
the counter to be paid; with this process it could be granted that the customers will
not have to wait to be serve as the shop will use a self-service model.
5
2.2 Mission
To offer a different and healthy lunch option, using fresh products day by day,
offering natural fruit juices and having the food ready for those that are worried
about the time and look for a healthy but quick option when having lunch.
2.3 Vision
To change the concept of fast food that people have in Colombia, selling healthy
and fresh food in a modern and stylish environment and being recognized as the
first fast food shop that could develop a different concept among its competitors.
2.4 Products
Fresh Gardens will offer a range of products that are categorized into three main
groups: Sandwiches, Salads and Wraps. Additionally, there will be offered a range
of fresh fruit ready to eat and natural juices (These juices will be prepared at the
moment that the customers place the order).
Graph 1: Product Classification
Source: Authors design.
PRODUCT CLASSIFICATION
MEAT
CHICKEN
HAM
EGG
AVOCADO
KING PRAWN
CHICKEN
FRUIT SALAD POT
MANGO AND MELON
APPLE, STRAWBERRIES AND APRICOT
STRAWBERRY
PASSION FRUIT
ORANGE
BLACKBERRY
GUAVA
PINEAPPLE
SANDWICH
WRAP
FRUIT
JUICES
6
2.5 Positioning
The fast food market has evolved during the last years in a way where it is crucial
to have a powerful differentiator form the competitors. For that reason, Fresh
gardens will be a fast food shop offering healthy, natural and fresh food, and
natural juices prepared by the time of the purchase and also designed for those
ones that enjoy the style and service of an English shop. Fresh gardens will focus
its strategy to young professionals, business people and postgraduate students, that
know the importance of the time and will look for food healthy and ready to eat
(which is not the case with the traditional fast food shops), so that its locations
will be on strategic points of the city surrounded by offices, universities and
hotels.
2.6 Scale and Growth Anticipation
Fresh gardens will start with the opening of two shops located in strategic points
of the city one around the traditional well known Parque 93 which is a zone
surrounded by the most prestigious and moderns restaurants of the city, and the
area is full of enterprises and offices; the other shop will be located on the down
town of the city, in a zone called Centro Internacional which has been
recognized for being a place where most of the important companies of the
country have located their headquarters, the most important universities are close
there and also some prestigious hotels. According with the success of those two
shops and bearing in mind that there has been a constant growth of the general
economy during the last 10 years; the initial projection is that after 5 years of
operations, Fresh Gardens will open shops in three of the main cities of Colombia
after Bogota which are Cali, Medellin and Barranquilla.
7
Chapter 3: Feasibility
Once the business idea has been generally presented, it is important to analyze the
feasibility of the project in order to determine if the idea is viable as a successful
business, so that the investment that is required could be done expecting
appropriates returns (Scarborough, et al., 2010).
Conducting a feasibility study, it will be possible to recognize critical points for
Fresh Gardens, such as:
Market (Segment, potential customers, preferences of the customers)
Sales (Forecasting, pricing)
Profit (Financing requirements, expected returns, investment assessment)
Industry (External factors determining the behaviour of the industry,
competitors, suppliers)
Internal structure (Organisation of the future company, managerial style,
strengths)
3.1 Market Research
Although the industry is big enough, there is one branch of it in where Fresh
Gardens will be competing which is the fast food line; this segment of the industry
has been the most representative in that landscape, because it generates more
consumption, more sales and high growth potential; so, what is fast food?
Fast food is all kind of meal that could be prepared in short time. Examples of that
are hamburgers, pizza, pasta, chicken and oriental food among others. Another
feature of this segment is that the food is prepared with less details and quality
compared with the formal ones. However, the market should please the
requirements of an urban development in where inhabitants need speed of service
(La Barra, 2009).
Actually, the consumption per person on food services is still low when
comparing with other countries of the region, however, the potential growth of the
market is strong and in continuous increase. Colombia is becoming a strong
8
economy with more than 45 million of inhabitants being the third biggest one in
Latin America (Schaefer, 2011).
3.1.1 Primary Research
The definition for primary research states that it is the one that is collected for the
first time by the researcher in order to develop a firsthand analysis (Institute of
Hotel Management, Catering technology and Applied Nutrition, 2008). There are
certain tools that allow the researcher to gather accurate information in a massive
way generating quantitative and qualitative conclusions. The tools that were
useful for Fresh Gardens were interviews.
The research developed for Fresh Gardens was conducted bearing in mind that the
service will be related with the preparation and sale of healthy food, ready to eat,
using high quality standards in where the freshest products are used delivering a
delicious food, free of preservatives. As Bogota is the city in where Fresh Gardens
will locate its operations, the interviews and surveys were conducted to people
aged between 20 to 35 years old, who are classified as social level 4, 5 and 61,
which means medium-high and high social level and represent 13.82% (259.255
inhabitants) of the total population (Bogota, 2011); this population represents the
potential market for Fresh Gardens.
SURVEYS
For this project and in order to gather relevant information about the customer
preferences it was defined to distribute 200 surveys that were answered personally
and through social networks such as facebook, linkedin and email. The model of
the survey can be found in appendix 2.
The main purpose of the survey was to know about the customer preferences and
acceptation about a different option for fast food. The survey has 10 questions that
aim to answer matters such as age, actual professional situation, enthusiasm about
1 The socio-economic classification is a grouping methodology that allows identifies the income
level of the people so that the public services fares, taxation and benefits could be distributed by
the authorities fairly. It goes from 0 to 6 being 0 the level with less income and 6 the one with
more. Source: www.dane.gov.co
9
fast food among others; for the complete information about the tabulation of
questions please refer to appendix 1.
After the tabulation and analysis of the information gathered, the main findings
were:
a. Most of the people that answered the survey like fast food and have it at
least once a week which means that there is a real potential in the market.
Graph 2: Acceptation of fast food
Source: Primary research
b. People have heard about fresh and healthy fast food and they are really
interested on this option as for them the most appealing variable is the
healthy feature.
Graph 3: Would you try fast food?
Source: Primary Research
25 27
54
76
18
0
10
20
30
40
50
60
70
80
Yes, always.Yes, weekdays.Yes, weekends.Yes, once a week. No
DO YOU LIKE FAST FOOD?
No. Of People
62%
2%
34%
2%
Have you heard about fresh and healthy fast food, would you try it?
Yes, yes Yes, no No, yes No, no
10
Graph 4: Willingness to buy
Source: Primary research.
c. The general acceptation of the business concept is good as people are
becoming more aware about the importance of quality and freshness when
having fast food.
Graph 5: Quality
Source: Primary research.
48%
36%
16%
Why would you buy fresh food?
Healthy Time saving Different and innovative option
57%24%
17%2%0%
How important is product quality?
Extremely important
Very important
Moderately important
Slightly important
Not at all important
11
Graph 6: General thinking
Source: Primary research.
From the analysis of the interviews it could be conclude that the people is more
interested about healthy and fresh food so that Fresh Gardens has a potential
opportunity on the market for establishes itself as a pioneer of healthy and fresh
fast food.
3.1.2 Secondary Research
Fast food market is the biggest segment in Colombia when talking about
restaurants and food industry. Currently, and bearing in mind the effects of the
global crisis, it is crucial to highlight that Colombia offers great expansion
opportunities, allowing so that, the most important fast food chains to start their
expansion around the country; as an example, the CBC group, which is the owner
of Kokoriko, is a big and well known chicken chain that has opened 20 new
shops and aim to become the biggest chain over the country, the same is the case
with McDonalds and Burger King that have planned to expand more during the
coming years.
The actual trend on the market has been the acquisition of franchises because
these ones offers knowledge, experience and save great amount of money in
promotion and marketing, nonetheless, acquiring one franchise is usually
expensive because its price depends on the brand recognition plus insurances,
guaranties and monthly payments for the owners. The fast food market is
It is a good way for saving time.
29%
It sounds interesting
because of the fresh products.
39%
Do not think it is going to
work.8%
It is better to know the style before saying
something about it.
24%
General Thinking About the Idea
12
composed by 83,5% of franchises and 16,5% of local owners (LaNota.com,
2012).
Who is the customer of fast food?
Around 58% of fast food customers have it between 10 and 14 times per month,
being lunch the most recurrent one with 68% of the total of consumption.
According with the statistics, the second and third social level are the ones with
mayor consumption of the segment but with preferences on chicken because this
product is categorized as the cheapest one so that people with low incomes go for
this option when going out for a meal.
According with previous researches, the market share in the country is divided as
follows:
Graph 7: Fast food market participation per cities.
Source: La Barra Magazine, Comida Rpida: El segmento ms grande del pas. 34th Edicin, 2011
As it can be seen on the graph 1, Bogota is the city with more participation on the
market in where the fast food market has presence with more than 500 places that
offers a wide range of menus, sizes, drinks, sides and entries that bring several
options for several tastes.
Among the market, there were identified three main modalities when having a
meal: take away; having on the same place, or for delivery. These options have
made the market an attractive one, when there is not enough time or money but
when a fresh and good food is wanted.
27.8%
11.7%
11.3%
4.3%
3.9% 3.0%
Bogot
Medelln
Cali
Barranquilla
Bucaramanga
Cartagena
13
In order to analyse the trend about consumption of fast food , the mayor of
Bogota, conducted a study among the population of the city finding that 72 people
over 100 that were asked, said to be consumers of fast food and more than 50%
said to visit one of those places frequently. Besides, it was also found that 21 out
of 100 people are classified as an average consumer as they eat out between 5 to 9
times in a month (Bogota, 2011).
Ranking the preferred food for the population, it was found that:
Graph 8: Consumption level for products.
Source: Proyecto de Acuerdo 208 de 2011 Alcalda Mayor De Bogot, 2011.
www.alcaldiabogota.gov.co
Despite of that trend of consumption, people is getting worried about the
overweight problem that comes as a result of the consumption of junk food since
recent studies have found that 1.700 millions of people are suffering of
overweight and 300 millions are already considered as obese. As a result, there is
an increasing search for healthy food but keeping some of the benefits that fast
food market offers such as low time consuming. In Colombia and even more in
Bogota, the healthy trend has gained importance and people are willing to
consume fast food since this one offers healthy options (Martinez & Masmela,
2011).
67%53% 49% 45% 37% 29% 28% 27%
0%10%20%30%40%50%60%70%80%
LEVEL OF CONSUMPTION
http://www.alcaldiabogota.gov.co/
14
3.2 Product Service Feasibility
Bogota, as the main city of Colombia is where most of the global fast food chains
look first when thinking about invest and open new shops; thanks to that boom, it
is possible now for the customers, to find several options when looking for places
and different menus instead of cooking at home. This particular trend has allowed
to the already established chains to expand its operations beyond Bogota and now
they are looking into intermediate cities where the competence is not that big.
However, there is a growing concern about the obesity of the people so that, the
governments and authorities have been generating new regulations in order to
ensure that fast food market has to re-accommodate their menus, diets and
nutritional value in order to minimize the negative impact over the population
(Bogota, 2012).
According with the District Department of health of Bogota, the fast food has an
enormous nutritional charge with high levels of calories, saturated and sugars,
factors that have contributed enormously with the obesity problems. Bearing that
in mind, Fresh Gardens was thought to be the solution for those who like and
enjoy fast food but offering fresh and healthy products with high standards of
quality and committed with the health regulations of the city.
This idea is supported by the primary research in where was evident the particular
interest for young professionals to find a different option that represents an
appropriate meal without having to wait for it, and also because it gives a sense of
high class habit as this model is particularly used and well accepted in the big
cities and Bogotas people want their city to be recognized as a big and
cosmopolitan city such as the developed ones.
3.2.1 Product/Service Concept
Fresh Gardens is about fresh and healthy food that means that all the products that
will be sold in the shops are made with fresh vegetables and precooked meats
(without any preservative or animal oil, just water, vegetable ingredients and
natural seasoning). The shops will count with standardized kitchens in where the
15
food should be done every single day according with the demand of the day so
that, trough the day all the products are fresh as they cannot stay more than 4
hours displayed on the showcases. Another important fact and competitive
advantage is that instead of offering coffee as most of the traditional shops even in
the UK, the concept will be to serve natural hand-made juices that are going to be
prepared at the time that the customer place the order at the counter so instead of
waiting for the coffee to be done, the customer will wait no more than 1 minute
for the juice.
The shops will be serve by kind and educate people, worried about the customer
service and although there will be no waiter service, the team will always be
attentive to what the customers requires. The environment in every shop will give
the idea of freshness, offering the products as a self-service mode, displayed in
show cases from where customers can decide what they want; there will be also
sitting place for those that are not in a hurry and want to enjoy a time having their
nutritive meals.
3.2.2 Target Customer Definition
The customer that has been defined for Fresh Gardens is a young and professional
person, aged between 20 to 35 years old that knows about style, the importance of
a different service and that is willing to pay a little more when is possible to have
better choices even more when is about food.
The segment of people in which Fresh Gardens will focus its efforts is the one
classified as 4th
, 5th
and 6th
social level. Why? Because this segment of people
usually have had the opportunity to travel abroad, to know the customs of
developed countries, moreover, they are most of the time busy people that know
the importance of having the best when talking about their wellbeing and also they
know that time is a valuable source so that they do not want to stay every lunch
time roughly one hour in a restaurant.
16
3.3 Industry Feasibility
3.3.1 Product Life Cycle
The current economical situation of the country and particularly of Bogota, has
allowed determining that the fast food industry is on the growing stage when
referring to the life cycle. During the last 10 years, the industry has increased 6%2
in sales volume, situation that has encouraged the opening of new restaurants and
shops from foreign and local competitors. It could be said that according with the
economical and political factors that have improved and because of new trade
agreements that the growing trend would remain at least for the next 5 years. On
the other hand, it should be remarked that as long as the new competitors and the
general industry focus their efforts satisfying the demand with more healthy and
innovative menus, improving the service offering quality attention to the
customers and investing on technological development s it would be possible to
keep the industry on track in where every single part has a significant market
share.
The advantage with this industry is that with some improvements, changes or
innovations on the menus offered, it is possible to avoid the declining stage
because these actions give the idea to the customers that the product offer is
totally new maintaining the interest from the customers. (SURA, 2011)
Source: Authors Design.
2 Colombian Asociation Foodservice Industry ACODRES. www.acodres.com.co. June, 2011.
INTRODUCTION
GROWTH: CURRENT STAGE OF
FAST FOOD INDUSTRY
MATURITY
Graph 9: Product life cycle.
SA
LE
S
TIME
http://www.acodres.com.co/
17
3.3.2 Five Forces Analysis
Analysing the external variables that could affect the business is a strategic and
must do activity, since it gives an idea about the field in which the new business
is playing. The five forces analysis, developed by Michael Porter, is a tool very
helpful because using it, is possible to make decisions about how to face the
competitive structure of an industry.
Rivalry of the Competitors
Although the pace of growth in this sector is high, during the last 10 years the
portfolio of products and services has increased,generating competence in prices
and quality. Another crucial factor is the imitation on the sector, which is very
easy when there is no big differentiation between one to other competitor. That is
why big and local chains have focused their efforts on the refurbishment of the
shops in order to compete with style and service. (COLOMBIA APRENDE,
2009)
Bargaining Power of Buyers
This particular market has the advantage of being accessible for all the social
levels, which means that too many people are willing to eat fast food at least once
a month. Having such a big demand, the competence between different shops is
evident when trying to keep the loyalty of their customers. However, as there are
so many customers, it is important for the restaurants to satisfy their needs as they
easily could change to another shop. In that sense, a key advantage is to satisfy a
small niche as their tastes are different allowing focusing strategies on unusual but
healthy food.
Threat of new Entrants
According with the market data for the industry, lately more international chains
have entered to the country opening shops in big and intermediate cities. That is
the case of Burger King, which has returned to the country opening 4 shops and
has plans of opening 20 more on the next four years (La Barra, 2009). The sector
is very accessible so there is a constant danger of being simulated and also having
18
less market share, that is why it should be emphasized the importance of a healthy
option, innovative and also focused on a particular market rather than the general
one.
Threat of Substitutes
The substitutes represent a real threat of displacement for the fast food products.
Currently, the hamburger market is a clear example of that, with McDonalds and
Burger King as international chains, and El Corral as a local one. These three
offer hamburgers in different presentations but at the end what is happening is that
they could not keep the same market share that they enjoyed at the beginning,
because the customers get bored easily and change to another option that they
could even been waiting for.
Bargaining Power of Suppliers
Colombia offers a wide range of suppliers when talking about the food industry.
Despite there are big suppliers for the big chains which in such a time could ask
for more incomes, increasing the cost of the raw material claiming that their
quality is the best among the others, there are so many small and local producers
that also offers great quality, accessible prices and even the possibility of being
part of the supply chain of the company adjusting themselves to the requirements
of the client. (COLOMBIA APRENDE, 2009)
3.3.3 Pestle Analysis
There are several macroeconomic factors that should be taken into account when
analysing the fast food industry as those can affect indirectly the performance of
the market. The most representative factors identified for this particular industry
are described in the graph bellow:
19
Graph 10: Fast Food Industry - Pestle
Source: Authors design with information from Restaurantes, Sura 2009.
FAST FOOD INDUSTRY
POLITICAL
New trade agreementsbetween countries such asUS and China.
Development of strategies inorder to enhance thecompetitiveness.
ECONOMICAL
Stability and growth.
Low impact from theinternational crisis.
Incentives and benefits forinvestments.
SOCIO/CULTURAL:
The current change onlifestyle.
Less time for eating at home.
Low unemplyment rates.
TECHNOLOGICAL
Local suppliers are using thebest technology producingwith high quality.
More access to loans.
LEGAL
New regulations aginstobesity.
Development of the law'MIPYME' for theeconomical support ofentrepreneurs.
ENVIRONMENTAL
Bogota is recognized as one ofthe best latinamerican cities ofrbusiness.
The life quality has improvedover the last 10 years.
More security for new investors.
20
3.4 Market Feasibility
3.4.1 Customer Definition
Based on the results of the primary research is possible to say that the customer of
the fast food market is the average Colombian that sometimes does not have time
for cooking at home or simply enjoy the idea of eating out as a relaxation method.
Depending of the product that is offered, there are variations of the type of
customers that go frequently to the restaurants. Nonetheless, the main segment for
this industry is the one composed for young and professional people aged 15 to 45
years old to which different food options are always attractive.
There is not a particular concentration of consumption in a determined social
level, however, the principal levels that use to go to those places are 3,4,5 and 6
which means people classified as medium, medium-high and high class. The
particular description for this customer is the one that has got an employment,
single or married, that worth the time so that they rather to eat something out and
quickly. In most of the cases in where they are married, both husband and wife are
workers so for them the fact of eating out is crucial as anyone stays at home
cooking (Escobar, 2012).
3.4.2 Market Size
According with the data gathered, Colombia is a country with the third biggest
population over the Latin American region (DANE, 2006), with 45 millions of
inhabitants, its economy is establishing as a strong one. The most important fast
food chains have expanded their operations around the country thanks to the
growth rate of 15% over the last five year, registering sales of more than $880 US
dollars. There is an expected average growth of 7% per annum over the total sales
being the fast food sector one of the more dynamics and important of the national
economy that remains evolving and growing continuously. (Gomez, 2011)
21
3.4.3 Customer Analysis
Everything is about service, style and innovation among the price and menu that
make one place different to another. The profile of the customer that uses to eat in
a fast food shop could be divided into two groups: the business and timeless
people who look for a place that could offers quality food without having to stay
in waiting long time to be served; the second group is conformed for those that
like to go out and have a meal on their free time, for a meeting, for sharing with
friends or any other activity framed on the informality.
These customers usually visit fast food places that are near to their study or work
locations so that it is highly probable that a loyalty between them and the shop
could be developed. However, those customers are not engaged with the place but
with the kind of food that they offer, so that for the shops to maintain their clients
it is extremely important to keep developing different alternatives on menus,
decoration and promotion in order to avoid boredom and monotony on customers
who are mainly characterized because of their changing tastes and requirements
becoming a population highly suggestible from competitors and other products
(Escobar, 2012).
3.5 Organisational Feasibility
The managerial style and the way in which a company is run is a crucial point to
have into account when developing a business proposal. It is important when
starting a business to be as organized as possible but also to be flexible, open to
change, always looking for new ways to do the activities and to assess every
single result in order to improve day by day; if that combination is possible, then
the good environment and the idea of flexibility will be bring to the final
customers from the inside of the organisation to the outside of this one, giving to
the people the sense of being in a new, well structured and flexible option for
them.
Fresh Gardens will be a limited company with head quarter in Bogota; the
company will be run by a general manager that should have a minimum of three
22
years experience on the field. The managerial style that will be develop inside
Fresh Gardens is a participative and flexible one, in where rather than being just a
manager, is crucial for the company to be a leader with character, competent,
consistent and committed with the innovation, change and flexibility required in
this business (Adeniyi, 2007). Fresh Gardens will develop a model of part time
shifts, with flexible times and schedules for its employees giving them a complete
feeling of freedom so that they could come to work relaxed and happy of being
part of the company.
3.5.1 Competence, Training and Skills Development
People that want to join Fresh Gardens should be flexible, passionate and
enthusiastic about the customer service and also delivering the best of them for a
new concept. The best profile that could define the employees for Fresh Gardens
is a creative person with high sense of initiative, proactive, excellent
communication skills as him/her will have to deal with customers, efficacy and
efficiency when managing resources; a key competence will be the ability for
learning as Fresh Gardens will held continuous workshops about leadership,
industry best practices, good workplace environment among others.
In order to accomplish with the market regulations and also because of the
importance of offering healthy and nutritious food with an appropriate diet, Fresh
Gardens will hire a nutritionist and a chef who will be responsible of the creation
and renovation of the menus offered at the shops. They will also be in charge of
the training about the food, ingredients and their manipulation; this training
should be given to all the employees of the shops because it is crucial for Fresh
Gardens to pass down all the information through the employees.
The personal that will be serving customers and also working on the kitchens will
be selected according with their qualification in areas like customer service and
food handling, however, Fresh Gardens will always be looking for young and
fresh people, preferably students that want a part time job with different and
flexible schedules because giving a nice, flexible and appropriate environment to
the employees will grant an excellent service for the customers.
23
3.6 Financial Feasibility
In order to determine the feasibility of Fresh Gardens a financial study was
developed. It is important to clarify that all the expenses and cost were calculated
for two shops as it is expected to open one in the central area of Bogota and
another at the northbound.
3.6.1 Sales Forecast
The forecasting of the sales for Fresh Gardens was developed under the
assumptions that:
The general growth trend for the sector according with the secondary
research is 6% per year, so that it was estimated 5% growth for the market
during the next 5 years.
It has been estimated to sell 150 products per shop as an initial approach,
as the market is highly competitive and at the beginning it is important to
develop a massive marketing campaign in order to enhance the population
for the healthy consumption of fast food.
The products that are going to be sold are presented as a deal of fresh
natural juice and sandwich, so that it is possible to manage a standard price
per deal of 3 regardless the kind of sandwich or juice.
As the shops will be located on areas surrounded by offices and
universities the shops will be open just Monday to Friday. Under that
assumption, the shops will be open 264 days per year.
Table 1: Fresh Gardens Sales Forecast
As it can be seen on the table above, there is expected to have a continuous
growth among the first five years. It is important to state that there will be none
policy about sales so that there will be not sales by credit as this product is
Year 0 1 2 3 4 5
Units 79.200 83.160 87.318 91.684 96.268
Sales Value @3/unit 237.600 257.563 278.798 301.374 327.518
SALES FORECAST
24
commercialized under the retail3 concept, that is why the sales value here
represented will be the direct cash flow on sales for the company.
3.6.2 Project Financing Requirement
Fresh gardens will require an initial investment of 66200 that is expected to
come from owners, private investors and a bank loan. In order to support the
investment required, the following table show a summary of the cash flows for the
first 5 years:
As it can be seen on the graph, the initial investment will be used all before the
starting of the operations. After the first year, the cash flow levels will start
increasing progressively without any financial support as the business should
perform in a self-sustaining way. Therefore, the cash inflows will be enough for
covering the cash outflows of Fresh Gardens. The initial investment required will
be 40.000 pounds that are going to be given 30% by the entrepreneurs and 70%
should be funded by a private investor; the other 26.200 pounds are going to be
funded by a bank loan.
The complete cash flow statement could be seen on appendix 3.
3Retail is the concept that defines the sale of goods from a specific location such as malls, stores,
markets, directly to the final customer in small quantities for the direct consumption. Source:
www.managementstudyguide.com
CONCEPT 0 1 2 3 4 5
TOTAL CASH INFLOW 66.200 237.600 257.563 278.798 301.374 327.518
TOTAL CASH OUTFLOWS 66.200 231.968 249.213 262.280 279.780 249.572
CASH FLOW SUMMARY
NET CASHFLOW FOR PERIOD - 5.632 8.350 16.518 21.594 77.946
OPENING CASH BALANCE - - 5.632 13.982 30.500 52.094
CLOSING CASH BALANCE - 5.632 13.982 30.500 52.094 130.039
EQUITY INVESTMENT 40.000
BORROWINGS 26.200
TOTAL 66.200
FRESH GARDENS FINANCING REQUIREMENT 5 YEARS FORESCAST
INVESTMENT REQUIRED
Table 2: Fresh Gardens Cash Flows
25
3.6.3 Profitability
In order to estimate the profits that Fresh Gardens activity could generate some
assumptions were crucial:
There is estimated an increase on the price according with the annual
inflation projected by the Bank of the Republic of Colombia.4
Costs of sales are expected to be 35% of the total sales. (Dinero, 2011)
A dividend of 10% will be paid every year after the second one.
The reserves will be used for reinvestment and expansion plans.
The above graph is a summary of the profit and loss statement that could be fully
seen on appendix 4. It could be remarkable here that the gross profit is supposed
to be increasing year after year roughly 10% which represent more capability to
cover general expenses and to increase the reserves for expansion plans. Although
on the first year there will be a negative performance as the expenses will be
bigger than the gross profit, after the second year Fresh Gardens will be capable to
offer a positive profit even covering the corporate taxes and the dividends agreed.
3.6.4 Investment Appraisal
Fresh Gardens will offer a return over investment of 27% which will be 5 units
more than the general market trend according with the institution that controls all
corporations activities in Colombia. (SUPERINTENDENCIA DE
SOCIEDADES , 2012)
4 Informe de Proyecciones Macroeconmicas 2011-2017; Direccin de investigaciones
econmicas y estrategias Grupo Bancolombia. Chapter 9, pg. 5.
Year - 1 2 3 4 5
Revenue - 237.600 257.563 278.798 301.374 327.518
Cost of sales - 83.160 90.147 97.579 105.481 114.631
Gross profit - 154.440 167.416 181.219 195.893 212.887
Total Expenses - 162.788 155.619 158.139 160.512 163.477
Profit before tax - 8.348- 11.797 23.079 35.381 49.410
Tax @25% 862 5.770 8.845 12.352
Profit after tax 8.348- 10.935 17.309 26.536 37.057
Dividends - 1.180 2.308 3.538 4.941
Transfer to reserves 8.348- 9.755 15.001 22.998 32.116
PROFIT AND LOSS FORECAST
Table 3: Fresh Gardens Profit and Loss
26
A financial assessment to Fresh Gardens activity was developed in order to
determine the attractiveness for investors from where the next results came up5:
Payback Period: The initial investment will be recovered after 2 years and
11.16 months.
Net Present Value: Assuming a 27% of cost of capital and according with
the cash flows for the first 5 years, the NPV of the project is equal to
21,178 pounds which means that the project is feasible as the amount is
major to zero.
IRR or Internal Rate of Return: Fresh Gardens offers an IRR of 27, 52%,
according with the rule of IRR, the project is profitable as the IRR is
greater than the cost of capital which is 27%.
Another important fact is that the ROEI for the project which is the return over
equity investment shows that after the second year, this relationship starts to
increase gradually representing major attractiveness for investors as the profits are
improving year by year.
3.6.5 Break Even Analysis
Fresh gardens will be a business highly affected by the variation of the inflation,
so that its fixed costs, prices and likewise variable costs and sales will increase
year by year. The breakeven analysis was done with an average of fixed costs,
prices and profits of the first 5 years; from the analysis it is possible to conclude
that Fresh Gardens will reach break-even point during the first year as the required
units to be sold are 76.974 which are less than the forecasted units that are 79.200,
in pounds the break-even value is 246.318, 35.
5 For calculations of payback period, net present value and IRR please refer to appendix 5.
YEAR 1 2 3 4 5
EQUITY 40.000,00 40.000,00 40.000,00 40.000,00 40.000,00
PROFIT AFTER TAX 8.348,00- 10.934,97 17.309,40 26.535,95 37.057,27
ROEI= -20,87% 27,34% 43,27% 66,34% 92,64%
Table 4: Fresh Gardens ROEI
27
Table 5: Fresh Gardens Break Even Analysis
No. Units Sales Contribution Fixed Cost Profit Befor Tax
0 0 0 160.107 -160.107
20.000 64.000 41.600 160.107 -118.507
40.000 128.000 83.200 160.107 -76.907
60.000 192.000 124.800 160.107 -35.307
80.000 256.000 166.400 160.107 6.293
100.000 320.000 208.000 160.107 47.893
-200,000
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
200,000
250,000
0 100,000 200,000 300,000 400,000
S
A
L
E
S
V
A
L
U
ESALES TO BREAK-EVEN
CONTRIBUTION
FIXED COST
PROFIT BEFORE TAX
-200,000
-100,000
0
100,000
200,000
300,000
400,000
0 20,000 40,000 60,000 80,000 100,000120,000
S
A
L
E
S
V
A
L
U
E
UNITS TO BE SOLD
SALES
CONTRIBUTION
FIXED COST
PROFIT BEFORE TAX
28
3.7 Resource Requirement Evaluation
Fresh Gardens will start with the opening of two shops in strategic points of
Bogota. As it is known, initially it is difficult for any company to start with a big
staff, even more in Colombia in where the regulations and taxes are very
demanding when related with the size of the company. Fresh Gardens will have
for both shops one General Manager professional in Business Administration with
specialization on Marketing and International Business; one Accountant; one
Nutritionist specialized on healthy diets, and one professional Chef who will be
responsible of giving taste and good presentation to the food; these four people
will be responsible for the general performance of the shops.
Additionally there will be two kitchen people and two front shop people for each
shop. These people will be responsible for delivering the best products among the
best service to the customers.
The salary and wages for the personal is explained on the table below:
Source: Authors design.
The concepts exposed on the payroll taxes and benefits section represent legal
obligations of social security that the employer should pay to the employee
according with the Colombian regulations.
SALARIES AND WAGES
POSITION # ASSUMPTIONS MONTHLY
General Manager 1 1.000 1.000
Nutritionist 1 1.000 1.000
Chef 1 700 700
Accountant 1 700 700
Kitchen Staff 4 300 1.200
Front Shop Staff 4 300 1.200
5.800
PAYROLL TAXES AND BENEFITS
Health 493
Employee Pension Programs 696
ICBF 174
SENA 116
Compensation 232
1.711
7.511
3%
2%
4%
TOTAL PAYROLL TAXES AND BENEFITS
TOTAL SALARIES AND RELATED EXPENSES
TOTAL SALARIES AND WAGES
FRESH GARDENS
9%
12%
Table 6: Fresh Gardens Salaries
29
3.7.1 Technology Gap Recognition and Planning
As Fresh Gardens aims to offer fresh and healthy food day by day, with natural
ingredients, there will be required to have appropriate fridges in each shop in
where the ingredients should be storage day by day keeping the appropriate
temperature according with the specifications of the nutritionist.
The sandwiches will be displayed in show cases that will work like fridges so that,
each show cases should have a refrigeration system that will keep the food already
prepare in an adequate temperature for freshness and quality.
The monitoring of the sales and waste will be a fundamental work, which is why
the most modern tills will be used, the technology of those till will allow to have a
direct and in real time record of sales as they will be linked with the shop system
allowing to the managers the control, recognition and feedback of the market
behaviour.
30
Chapter 4: Strategic Analysis and Business Model
Every idea of a new business could be successful as long as it goes stick to a
proper strategic planning and analysis. Nowadays, when modelling a business
there are different scenarios that make the business cycles shorter than before
because of the use of internet and the possibility of spreading faster the
information and so the requirements of the customers and then because of this
trend, companies should be able to move and adapt their strategies faster and
appropriately in order to satisfy their markets (Instant Strategist, 2008). Fresh
Gardens will be combining the traditional business concept known as brick-and-
mortar business in where a face to face service will be offer to the customers
along with online services in where the menus, services and specifications of the
products will be available for everyone who wants to know a bit more about the
company.
According with the way in which a business model will be developed it is
extremely important to define a strategic path that supports the business process.
The strategic analysis should contemplate the internal and external environments
in order to choose the appropriate techniques and to make the adequate decisions
so that it is possible to come give an idea about the company structure,
competitive advantage, strengths and weaknesses when implementing the
business concept. (Hill & Jones, 2012)
4.1 Ansoff Matrix: Strategic Choice Analysis
This strategic tool was proposed by Igor Ansoff (1957)6 and it helps to identify the
companys strategy according with the chosen market and the product
development, generating 4 different growth scenarios: market penetration, market
development, product development and diversification. (Stone, 2001)
6 Igor Ansoff Known as the father of strategic management developed this tool that was first
published in Harvard Business Review in 1957. www.businessdictionary.com
31
Graph 11: Ansoff Matrix
Source: www.tutor2u.net
Graph 12: Ansoff Matrix for Fresh Gardens
EXISTING PRODUCTS NEW PRODUCTS
EXISTING
MARKET
The current market in which fast food is
highly profitable is the one located in
social levels from 2 to 6 in Bogota. This
market has already a wide range of
products such as hamburgers, hot dogs,
sandwiches and pizzas. Fresh Gardens
does not aim to compete with the same
products on the existing market. (Bogota,
2011)
Fresh Gardens aims to develop a new
concept of healthy food focusing its
strategies on adding new values to existing
products like sandwiches, changing the
way of making them, implementing new
quality standards of production and using
natural, fresh, and healthy and no frozen
ingredients.
NEW
MARKET
This kind of food is always related with
people that do not have time, money or
interest on eating in a proper restaurant.
According with this, it is unlikely to say
that a new market could be developed
with the same products as there is no
incentive to other style of people on
having this kind of food.
Fresh Gardens will bring a new style for
the fast food market, having as a core
value the importance of healthy and ready
to eat food; under this conception, the idea
is to attract more people from the high
social levels such as 4, 5 and 6 to whom
the idea of eating best with the best
ingredients is gaining more importance
year by year according with the global
trend.
Source: Authors design.
32
The matrix presented is applied to Fresh Gardens in order to determine which will
be the most suitable strategy for the company. In that sense, it shows that Fresh
Gardens has great potential developing the Product development strategy as
there will be an improvement on a current product offered in the market aiming to
gain customers with the idea of healthy and fresh food. Additionally, it is also
possible to state that Fresh Gardens could also develop a diversification strategy,
as another important success factor, to attract customers highly interested on
healthy food as an alternative when the time is short or simply because they do not
like the traditional restaurant service.
4.2 Mckinsey 7 S Framework
This model that was developed in 1980 by Tom Peters and Robert Waterman,
both consultants of the McKinsey and company firm, offers a framework of seven
variables that come from the inside of the organisation and are supposed to work
in an intrinsic way so that the success could be achievable. (Abraham, 2012)
This model is very useful for Fresh Gardens as its use, allows identifying the most
important factors that will position the company as one with a well established
structure and policies.
33
Graph 13: 7'S Framework for Fresh Gardens
Source: Authors design.
Fresh and healthy food (sandwichs, saldas and natural fruit juices) creating a new style on the fast food market in Colombia.
Adapting english model of this business into a Colombian culture in where people is always interested on customes and habits from the first world.
Offer the services of healthy food to the local government in order to supply public schools as part of the social program.
STRATEGY
Flexible company in where innovation should be the most important aim among the shops.
Fresh Gardens will be a private company registerd on the Chamber of Commerce in Bogota.
Fresh Gardens will work under the flexible shifts models for their employees offering part time positions with adjustable schedules.
STRUCTURE
Should be enthusiastic about the healthy food.
Young students interested on a flexible job but also on delivering the best of them for the customers.
Qualified professionals on food and nutrition in order to create the best menus.
STAFF
There will be a system in where all the tills will be linked with the central system in order to keep a close control over the sales and then to determine the production for the kitchens.
The compnay will use SAP as the main system allowing integrating all the areas of the company in one system for decision making porcesses.
SYSTEMS
Fresh Gardens will develop a continuos training program in order to deliver the best of knowledge about the importance of an excellent customer service, the latest trends of healthy eating and also training about the new products and style of service.
Fresh Gardens will hire people regarding their passion, learning ability, food control knowledge, adaptability and iniciative.
SKILLS
The main theme of both shops will be the healthy and fresh food environment. According with that, the staff should ensure the delivering of friendly attitude, smiles and quality service.
The shops will be characterized because of their fresh and illuminated spaces, with music that estimulates feelings and emotions making the spaces unique and different.
STYLE
Sustainable development ensuring the inclusion of local producers of the ingredients.
Commitment on delivering the best on customer service.
Promoting the importance of healthy habits.
Delivering fresh and healthy options even when people do not have enough time for themselves.
SHARED VALUES
34
4.3 Value Chain
The value chain analysis is one common and useful tool developed by Michael
Porter in 1985. The general idea with the tool is to identify and separate primary
activities, which are the ones that generate value to the company and so to the
customers, from the support activities, which are the ones that work as the basis
for the adequate development of the general activity of the company. (Porter,
1998).
The graph 15 shows the complete value chain for Fresh Gardens in where all the
primary and support activities are clearly identified and described in order to give
a wide overview of the general activity. What can be analysed from the value
chain for Fresh Gardens is that the primary activities are based on a daily activity
in order to deliver the best of service and quality to the customers, is because of
that that coordination of times and volume of ingredients from the inbound
logistics will be basic for operations and outbound logistics in order to create the
perfect products that should be adequately displayed in the shops.
Additionally, it is also noticeable that from the support activities depends most of
the success of the primary activities as the former are about an appropriate internal
environment in where the continuous development and adequate relationships
should be the pillars of the organization.
4.4 Swot Analysis
Among the theory, many things has been said about the SWOT analysis, however,
this tool is widely used as it represents the possibility of understanding the
internal and external environment together with the advantage of generation of
strategies that integrates both environments. SWOT stands for strengths,
weaknesses, opportunities and threats and together; the assessment of these four
aspects allows structuring plans knowing what the company is and is not able to
do and so unveiling competitive advantages that at a naked eye is not possible to
see (Ferrell & Hartline, 2011).
35
The SWOT analysis for Fresh Gardens is presented on graph 14, this graph
exhibit the four elements giving the most important characteristics identified on
the environment. What could be identified as key factors is the potential growth
that this industry has in Colombia and also among the region, however there is no
doubt that the low entry barriers are also a possible issue for new and small
competitors, that is why Fresh Gardens should focus its strategies on promoting
the fresh and healthy food as the most needed product that will satisfy the needs of
the market.
Graph 14: Fresh Gardens SWOT
Source: Authors Design.
STRENGHTS
Main focus on healthy food.
Strong emphasis on qualitycustomer service.
Continuous innovation on menus.
Adaptation of english coffe shopsmodel to the colombian market.
OPPORTUNITIES
Expansion to other LatinAmerican countries.
Exploitation of local resourcessaving money on imports.
Cosmopolitan environment andmore sophisticated customers.
WEAKNESSES
Small competitor for big fastfood chains.
No hot food offer.
No alliance with dirnkproducers for gettingsponsorship.
THREATS
High informality on the sectorthat could generate unfaircompetence.
Appreciation on prices ofingredients.
High prices on rent because ofinflation.
36
Graph 15: Fresh Gardens Value Chain
Source: Authors Design
37
4.5 Sources of Competitive Advantage and Sustainability
Having a competitive advantage means that competitors cannot copy the idea
easily because the product or service offered has a particular characteristic that
indentifies the company with its customers. However, not always the competitive
advantage is unique for the company and most of the time; competitors copy it in
order to expand their market share. The important thing on having a competitive
advantage is to make it sustainable through the years (Lamb, et al., 2009).
It is important that the company implements a value-creating strategy that the
competitors will be unable to duplicate. According with Anthony Henry in his
book Understanding strategic Management, 2008 the resources for an
organisation should have four attributes for a sustainable competitive advantage,
these attributes analysed for Fresh Gardens are:
a. Valuable Resources: As Fresh Gardens will have capable people for
delivering the best on customer service; Fresh gardens will also hire local
producers that should deliver the best of fresh and natural ingredients for
the company, encouraging the production of raw materials in order to
generate welfare among all the productive chain.
b. Rare resources: Referring to the managerial style which will be completely
flexible, inclusive and adapted to the English model which has worked
pretty well on the coffee shops. Fresh Gardens will focus its efforts in
differentiation of products and service delivering style into a cosmopolitan
environment.
c. Difficult to Imitate: Fresh Gardens will pact exclusive relationships with
local producers. On the other hand the style of service, the idea of healthy
and fresh ready to eat food and the managerial style will be an adaptation
of foreign models so that it could be said that the company will be pioneer
on this kind of business around the country.
d. Substitutability: The fast food market is full of different options for eating
outside but according with the current trend on eating healthy and also the
lack of time for what professional people in suffering there is not a single
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option for these people, maybe some shops give solution for the lack of
time but any of them have focused their efforts offering healthy and fresh
food ready to eat as the cost of managing fresh ingredients without
preservatives or without being frozen is costly. (Martinez & Masmela,
2011)
The above four attributes give to Fresh Gardens the capability of having a
sustainable competitive advantage among the industry as all of them look after the
differentiation form the competitors.
4.6 Selection of Strategies for Success
Fresh Gardens wants to be recognized as a different option when talking about
fast food restaurants. According with Michael Porter and his model of generic
strategies (Eldring, 2009), in which he proposed that there are three generic
strategies that companies can choose in order to develop a competitive advantage
which are cost leadership, differentiation and focus strategy, Fresh Gardens will
always look for the differentiation strategy.
The aim and philosophy of Fresh Gardens is to deliver fresh and healthy food. In
order to make that possible, it is crucial to have fresh ingredients day by day on
the shops kitchens. This production process could result expensive but it is also
important to keep in mind that the segment of customers to what Fresh Gardens is
looking to attract is classified as high socio-economical level and that is why the
final price for a meal is not as cheap as the one of the competitors.
4.7 Development of Appropriate Business Model
An appropriate business model is useful for understanding the organization,
interactions, relationships, strategies and value delivering processes for an initial
idea. A business model is helpful when communicating to others what is meant to
do and how it will be done (Bridgeland & Zahavi, 2009), it should clarify the key
points of the idea emphasizing on the creation, delivering and capturing of value
for a specific customer.
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According with Osterwalder & Pigneur (2010) the business models have similar
patterns that could be classify in five different general model styles (Osterwalder
& Pigneur, 2010). From those patterns, the model that concerns the creation of
Fresh Gardens is called Unbundling Business Model as this idea will be related
with a product innovation business rather than a customer relationship business or
infrastructure business. In order to clarify what Fresh Gardens is about, the
Canvas Model7 proposed by Osterwalder & Pigneur was used as can be seen on
graph 16.
It is important to highlight the relationship between all the components of the
model starting from the customer segmentation that, as was mentioned before will
be people characterized because of their high socio-economical classification,
young and professionals that know about the necessity of having healthy food but
also the crucial of good service and style when choosing places to eat. In order to
satisfy their needs and requirements, the customer relationship will be a total
responsibility of the staff that should create an appropriate and friendly
environment when serving customers so that the channel of promotion including
shops and their decoration style will be adequately exploited.
There are also key elements such as the partners, activities and resources that
should be choose and managed according with the value proposition for the
customer, having that in mind, Fresh Gardens will be on a constant control and
communication of those resources in order to guarantee the delivery of the best
value for the customers. Finally, the right combination and use of the above
elements will be translated in satisfactory levels of revenue, having in mind that
the strategy of Fresh Gardens will be differentiation focusing on delivering the
best of service and quality to the customers.
7 Tool preformatted with the nine blocks which allows painting pictures or concepts about new or
existing business models. (Osterwalder & Pigneur, 2010)
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Graph 16: Fresh Gardens Business Model
Source:Fresh Gardens adaptation of Canvas proposed by Osterwalder and Pigneur.
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Chapter 5: Business Plan
This final chapter aims to develop an overall assessment of the entire business
proposal for Fresh Gardens. Every main aspect related with the company,
marketing, production, operations, financing and plan of action will be described.
5.1 Overview of the company:
Fresh Gardens will be a limited company registered to the Chamber of Commerce
of Bogota. The company will be operating on the market of fast food restaurants
with two shops located in Parque de la 93 and Centro Internacional. The style
of the company will be an adaptation of a well worked model in cities such as
London and New York as the current environment on Bogota is characterized by
busy people, professionals that worth the time, healthy habits and different
options that leave behind the traditional stereotypes.
The main idea and competitive advantage of Fresh Gardens is to offer fresh and
healthy food ready to eat in order to benefit those that do not have enough time for
having a proper lunch or simply because they are tired of the traditional and
unhealthy fast food but still like the kind of service and speed that this model
offers. The friendly service and passion that the staff should deliver to the
customers is a core value for the company for this reason, there will be continuous
training about this matter.
Objectives
To deliver an innovative option on fast food market, changing the traditional
concept for one in where the healthiness and freshness of the products are the
most important and core drivers of the company operations. In order to have
success into the market, it is important for Fresh Gardens to focus on:
Fresh and healthy ready to eat food for busy professionals, business people
and postgraduate students.
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Deliver quality service to the customers reflecting passion and enthusiasm
to serve them.
Innovation on menus in order to keep the interest of the customers and
also for attracting new ones.
5.1.1 Marketing Plan
Market Analysis:
Fast food market in Colombia, especially in Bogota is a high competitive market
because of its potential growth that results from the positive behaviour of the
economy over the last 5 years. Many big fast food chains have decided to move in
to Colombia as their plans of expansion over the region; that is why big chains
such as McDonalds, Burger King, Pizza Hut among others have started plans of
expansion into the national territory mainly focused on intermediate cities.
Despite the high competition, there is a big advantage on this market as people are
always looking for different options when going out for food, which is why lately
the healthy concept has gain importance becoming a feeding trend.
Buying Behaviour:
Nowadays people are not that loyal to a company or brand that do not do anything
new constantly; the customers of the fast food market generally are people that
worth time and do not like to spend hours on a place waiting to be serve even
more when they are professionals or busy people because of their studies or
business.
According with that, customer always is looking for a short and easy menu
expecting to be served as quick as possible and to have its meal in a short time so
that they can have and keep going with their other activities; if they cannot have
this benefits, they will change their mind and choose another option.
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Competitors:
As it can be seen on graph 17, there are several competitors on the fast food
market. The list presented is a mix between local and international competitors
that already have participation in most of the big cities in Colombia. However, all
of these competitors do not offer sandwiches, salads and natural fruit juices as the
main products of their menus, they just have one or two different options for those
that would like to change their feeding habits.
Source: SURA Restaurants Inform (SURA, 2011)
Market Segmentation:
Fresh Gardens will focus its strategy attracting young people aged 20 to 35 years
old that are classified as 4, 5 and 6 socio-economical level according with the
current classification on the city. Most of the people included in this range of age
are professional, postgraduate students or own their proper business what makes
them value the time because usually they are busy on their stuff. This people is
also moved by international trends as they have had the possibility of knowing
different cultures so that they know that the healthy and fresh food ready to eat is
an option that could satisfy widely their needs.
Graph 17: Fresh Gardens' Competitors
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Marketing Strategy:
Fresh Gardens will attract customers offering a different option when having fast
food out of home. The main features of the menus offered by Fresh Gardens will
be the freshness of its products which will be done over a healthy basis using the
best ingredients coming from local farms and producers.
Fresh Gardens will add value to the food that customers look for eating when time
is not enough for a traditional lunch. What Fresh Gardens will do is to offer food
with the adequate combination of nutrients that could replace on a healthy way the
traditional food.
Pricing Strategy:
Fresh Gardens will not compete with prices as the company will fix a price for a
deal of 3 which is made-up of one sandwich with natural fruit juice. This price
will be on average of the current prices on the market that normally are 2.5 to 4
pounds for a basic deal.
Promotion Strategy:
Fresh Gardens will promote its products mainly through the distribution of leaflets
in front of universities, offices and gyms. Additionally there will be billboards
posted on the area in where the shops are going to be located; this promotional
campaign will be supported by the creation of a web site in where people will be
able to find all the information about the products and the main values of the
company. Other important strategies are:
Partnership with the most important gym chain called BodyTech as the
people worried about healthy food uses to go constantly to the gym in
order to keep themselves healthy and actives.
Strategic alliance with the Secretary of Education of Bogota in order to
distribute among schools and universities sandwiches and natural juices
as part of a campaign against the bad feeding habits.
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5.1.2 Management Style and Structure of the team:
The flexible style in order to promote innovation and passion about Fresh
Gardens activity will be the key driver for the company. The company will be
manage as a friendly place in where employees will feel as a part of a team that
work together for the welfare of the customers.
The company will use the model of part-time shifts in order to avoid the boredom
of the staff and also giving them the possibility of managing their time according
with their needs.
It will be crucial to maintain a continuous training about customer service, healthy
food, enthusiasm and team work as all the stuff should work with a positive
thinking about what they are d