SHMS Coffee Shop Business plan
Written By:
Haseeb Ur Rehman Shaikh Mansoor Malik Saima Mustafa Supro Shuaib Ahmed Narejo Submitted To :
Sir Faiz Khuawja
This document is written solely for the purpose of submission and grading to Mr. Faiz Muhammad Khuaja as a class project for the subject of Entrepreneurship . This document cannot be copied or Edited without the permission of all four authors in written. Disclaimer:
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1 Introduction 1. About SHMS Coffee There is growing recognition of the need for new Brands in market place. Consumers are demanding more than “product” from their favorite brands. In today’s competitive environment, everyone wants to have such type of Products which satisfy the. Coffee is second only to water as the world’s most popular drink, with more than 400 billion cups consumed every year. Coffee is a giant industry employing 20 million people globally, and ranks as the second most traded commodity on the planet after petroleum.
Location Keeping in view the industry and need of customer we little champs start “SHMS Coffee Shop” in the area of Defense Phase-II Phase-II Ext. Karachi. We offer Seasoned based coffee with different Flavors. We offer satisfaction of consumer needs by providing great customer service experience and Quality product.
Name Stands For SHMS pronounced as (SHAMS) Stands for the Name of 4 Entrepreneurs Students of BBA at SIBA sukkur.
S Saima H Haseeb M Mansoor S Shuaib
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1.2 Name(S) and Address (es) of principals Haseeb-Ur-Rehman Shaikh Email:
[email protected] rd
Add: house # C-2763 3 floor Sarafa Bazar Sukkur
Saima Mustafa supro Email:
[email protected] Add: House# 211 Shahi Bazar Naudero, Larkana.
Shuaib Ahmed Narejo Email:
[email protected] Add: House# 789 Narejo House Khairpur Mir’s
Mansoor Ahmed Malik Email:
[email protected] Add: Malik, House near post office Naushehro Feroz.
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2.0 Executive Summary At SHMS Coffee Shop, the choices we make and actions we take are a reflection of our core values. To become leading retailer, roaster and brand of specialty coffee took the vision to create a values-driven coffee company inspired by passion, dedicated to quality and guided by exceptionally strong principles.
The Overall Strategic Plan of represents the New Business idea of Seasoned Coffee, Coffee of all seasons to change the perception and mind set of people that coffee is only winter product. We provide value added services by focusing on Niche Segment, to cater huge no: of customers includes individuals, Business Class meetings. Our goal throughout this Report is to provide information about our policies and practices, measures of our performance, competition, Future Business Strategies, Financial and So forth.
This Document includes the Broad Vision, mission, and Strategic & Financial objectives, long term and short term Goals that would support the SHMS Coffee to achieve their strategic and financial objectives. Moreover, this Study includes Internal as well as External Environment Analysis, and its SWOT Analysis. To carry out all those Strategies we have made In-depth marketing and financial plan to see the capacity of SHMS Coffee to increase its capacity and grow it.
Moreover the action plan is also given which shows the activities designed and completed at specific time period which will SHMS Coffee Shop to carryout operations at given pace.
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3 Industry Analysis 3.1 Future outlooks And Trends.
Economy has major role in success or failure of any business hence our business would also be affected in a way that if interest rate is increased or decreased the tax system, the inflation rate, population size, Per capita Income and so forth. 1
Inflation rate: Inflation is very volatile in Pakistan, currently 13%, in last quarter it
was jumped from 10.2 to 16.5% , which will strongly affect the prices of Coffee and pricing strategy, but as we operating in Defense Area and High Class, it will be very little effect on sales in terms of Change in Price and so forth. 2
Outright Prices: Coffee prices can be negotiated either at outright prices or in
relationship to the prevailing wholesale price. We at SHMS will give preference today is to source coffee at outright prices. This provides stability and predictability for both buyers and sellers. In fiscal 2011, 12 percent of coffee supply 74 percent of green coffee will be purchased at outright prices. 3
Per Capita Income : One of the Positive indicator for our business operations, Per
Capita Income Jumps from $1206 per year to $3100 in 2011 , which means people having more money to spent for consumption which will positively affect the sales of Coffee. 4
Population size: Population size also increases in Pakistan, and 65 of Population in
the age bracket of 20 to 40, the youth we are targeting the major portion of population size, which will strongly positive for our Coffee sales and so forth. Apart from that Population growth rate is 2.5 and day by day trends of Consumption is going towards fast foods and outing outlets like Coffee Shops and so forth. 5
GDP Growth rate :
GDP in Pakistan is growing every year, in 2012 are 2.39 and people having more money to spend as discuss above in per capita Income also increasing, which will positively effect on sales of our Coffee.
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Technology
Emerging technological changes having little impact on our Business operations, Because only the Coffee machine is Required other things will manually manage at our SHMS Coffee Shop, as Standard of Coffee making changes we will be change the way to follow Global standards and Starbucks as our Benchmark, and it will having very little impact on our Coffee Quality and sales.
3.2Market Segmentation Our targeted customers will be the young coffee lover individuals; our main focus is to provide great experience of coffee to youth and specially the business class people and party lover individuals.
Business Class
Youth
Corporate customers
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3.3Competitors Analysis Pakistan is a tea culture. However with time we have seen Pakistan opening its doors to the coffee culture. Coffee culture has been so fast in spreading its wings with new coffee outlets opening left right and center in Pakistan. These coffee shops have played an important role in introducing coffee to the masses in Pakistan. Now that coffee awareness has grown to such extent tea might finally have competition. Younger generation in Pakistan definitely prefers coffee over tea. This is not only because coffee is more hip than tea but also because coffee is more helpful in keeping energy levels going than tea ever has been. Professionals in Pakistan who need to be on the go for long hours are fast quitting the frequent tea breaks with fewer coffee breaks. In the markets in Pakistan there are many varieties of instant coffee mixes available. Ironically now in Pakistan making tea is considered more difficult now that is how intensely coffee culture has taken over. In addition usage of coffee in everyday products especially bakery products has become very frequent. Use any coffee mix brew it in hot water, sprinkle with nutmeg, you can add sugar later according to taste.
3.4 Current Competitors
SHMS Coffee Shop operating in DHA extension area in Karachi having few close competitors includes, A-one Snacks, Espresso Coffee Shop and Coffee at Hot & Spicy. We compete on differentiation of providing seasoned coffee and Targeting on
Market Niche of youth and Business Class.
A-one Snacks Coffee
Espresso Coffee Shop
Coffee at Hot & Spicy
PORTER’S FIVE FORCES MODEL
This Model emphasis the mode of Competition in our Coffee Industry, which includes; 1
Threat of New Entrant’s : We will operate our Coffee Shop in Defense Phase-II Ext.
Area where very few are available, yes new Entrants are open and not in our control. We will give them the competition in terms of maintaining our customer, capturing the new market and price controls.
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1
Bargaining Power of Customer / Buyers: As we operating for the High-High and
High-Middle so bargaining power is very low, where the product is of Premium Quality and Status Symbol. 3
Bargaining Power of supplier: Bargaining Power of Supplier is medium, because
there are not many suppliers of Coffee Beans and other raw materials of Coffee in the market. We will manage this with strong relationship with one or two suppliers and keep our materials ready and less bargaining over prices but we need quality. 4
Threat of Competitors:
In Coffee Industry Competition is different, very few
competitors available near the area, and we make competition not in terms of prices but on Service experience and customer satisfaction. We provide value added services with High end Coffee to make “Win-Win” Situation. Substitutes Products: No direct substitute of Coffee, indirect Substitute of coffee
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can be the tea, Coffee lover does not want to shift, and yes different Flavors can be substitute but is in internal. Apart for that customer make differ with variety of taste and Seasoned Coffee which we will be offer at greater extent. Summary of the Model in Perspective of SHMS Coffee Shop
Bargaining Power of Buyers
Low
Bargaining Power of Suppliers
Moderate
Barriers to Entry
Moderate
Threat of Substitutes
Low
Competitive Rivalry
Low
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4. Description of venture 4.1 Our product(s) and Service(s) “The choices we make and actions we take are a reflection of our core values”
We offer “Seasoned Coffee” with amazing service experience with great interior décor and ambiance for the customers
We offer different flavors of coffee as per the choice of our customers
We offer friendly and romantic environment as customer desire.
Coffee Drinks SHMS Coffee will provide;
4.2 Size of Business The business is new and as for as the finance/budget is concern the business will be funded by all the partners so the business will be consist of one shop at starting of the business.
4.3 Office Equipment and Personnel Equipment
Chairs and tables
Coffee maker
Crockery
Personnel
Manager
Waiters
Cook
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5.Production and Operation Plan 5.1Manufacturing process The manufacturing process of coffee is very simple it flows in the sequence shown in figure.
Step 1
Blending or Grinding the Cofee Beans
Step 2
prepearing the cofee as per order of the customer
step 3
Adding milk or cream as per the Requirment 5.2 Machinery and equipment The following items are required:
Coffee blenders
Stoves
Cream beater
Other utensils
5.3Operations of company
Inbound Activities: Inbound logistics for SHMS coffee includes the purchasing of
raw material from supplier and reaches to our store warehouse. The cost includes the product cost, and the transportation cost and storage cost also.
Operations: It includes the production of Coffee at Shop, and gaining the orders,
placements of Halls with according to the orders and customer feedback the most focused areas.
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Outbound Logistics: For SHMS as not such any outbound activities, because we are
operating in Junk Food providers that serve as on the spot Product and services also rendered at the same time.
Marketing and Sales:
Marketing activities of SHMS includes the Cable
Advertisement in Karachi for creating the awareness to customers, and some Bill Boards will be placed at nearby located areas and mainly focusing on word of mouth, by Visiting Business Institutes and organizations also for distributing Brochures and provide them discount offers and so forth.
5.4Flow of order for goods/Service
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1. Marketing Plan 6.1 Pricing
Pricing policy of company is very simple as we are operating in DHA Karachi we would be charging price lesser than our competitor ( A-one Snacks, Espresso Coffee Shop and Coffee at Hot & Spicy ) in starting to capture the market.
Rs.100/= cup of coffee.
6.2 Distribution For SHMS as not such any outbound activities, because we are operating in Junk Food providers that serve as on the spot Product and services also rendered at the same time.
6.3 Promotion We will launch 360 degree campaign for SHMS Coffee Shop. As this business initially is operated just in Karachi Defense area so we will have niche marketing to focus on so promotional strategy includes;
Local cable TV ads
Distributing Pamphlets (Visiting Universities and Companies)
Publicity
Retail Merchandising
Online marketing
Local Cable TV Ad
As our business is located in Karachi so it’s appropriate to use local TV ad this would limit to the geographic level according to our requirement and will also reduce the expenses. Local cable TV advertisement will include a moving footer ad “at the bottom of channels” which will create awareness in our target audience and along with this a 30 sec TV commercial will also be launched to effectively execute advertisement. Pamphlets
Pamphlets would be kept inside the newspapers so it would also be effective source of providing information regarding our business. For accomplishing this task we would contact with newspaper venders.
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Publicity After registration of our business, we will visit universities and Companies. Moving ahead, from head offices, through emails and telephone calls branch mana gers could be told regarding our service easily and then branch managers would at least aware their customers regarding our services. After this initial publicity, automatically positive word of mouth would be generated when they will use our service with high satisfaction. So publicity is strong and very important tool for our marketing campaign. Retail Merchandising:
We will carry out our merchandising in the offices so that:
Get a chance to explain them about our business and the benefits t hey can have by getting our services educate them about new services and ease to avail those services
Online Marketing
Now a day’s most of the organization is working on online marketing that is ver y cheap and feasible, so in online marketing we’ll use Google Ad word (advertising tool provided by goole.co). Secondly social marketing tools like face book, LinkedIn will be used to get people inform about the service. Moreover we will also develop a website, Facebook page, to give the customers more information about the services we a re offering and how it is beneficial in future prospect. Besides this there will be a feedback system which will record all the complaints and suggestions of customers for further improvisation in our services. Summarizing all this: a) Website development b) Google ad wards c) Fan pages on social media webs (Facebook, LinkedIn, twitter).
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2. Organization Plan 7.1 Form of ownership There are three forms of businesses which are described below:
Sole proprietorship: a form of business operated by a single owner having all responsibility for liability
Partnership: a form of business operated by 2 or more partners, all having the equally liable for the liabilities. Corporation: a legal entity that is run by stockholders having limited liability.
As we are four students (HASEEB, SAIMA, SHOAIB and MANSOOR) in this project so we have decided to go for the partnership and we require an initial investment of PKR.1, 000,000/-, so each partner would contribute PKR. 0.25million.
7.2 Identification
of partners
Partner’s Name
Contributed amount
1. Haseeb Shaikh
PKR 0.25million
2. Saima Supro
PKR 0.25million
3. Shuaib Narejo
PKR 0.25million
4. Mansoor Malik
PKR 0.25million
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7.3 Roles and Responsibilities of Members Actions (what)
Business Registration
Who (Responsible for Task)
Marketing and Brand Head (Haseeb Shaikh)
Search for Coffee Shop , Buying Fixture and furniture
Operation Head (Shuaib Narejo) Finance head
Selection of Interior Decor
Hiring general staff
Executing 360 degree marketing campaign
Efforts to grow Sales (Promotional Activities)
Expansion of business through adding one more coffee shop in Karachi at different location
How
Law consultant for company registration under Companies Ordinance, 1984, vans & machine buying will be done through vendors
when
January 2013
With the help of his operation team Administration and logistics
December 2012
With observational research of other coffee shops
January 2013
Admin head
(Mansoor (Saima supro) Malik)
Saima. Shoaib, Haseeb
By following complete Recruitment process
Marketing Head (Haseeb Shaik)
Carrying out different activities like publishing ad in newspaper, local cable TV ad launching, retail merchandising and so on
January 2013
Haseeb Shaikh
With the help of sales team efforts would be made to increase no: of customer base
JAN-JUN 2013
Buying will be Operations Manager made through (Shuaib Narejo) different venders
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January 2013
JAN-JUN 2014
8 Assessment of risk
8.1 S.W.O.T analysis This part will covers our Internal factors Evaluation as Strengths and Weaknesses, that we have in terms of Financial resources, our core Competencies, our Staff our Product and Services and so forth. Apart from the Internal we will have External Factor Evaluation which will cover the market analysis that what are the competitive advantages we have, what are the Competitors we have to fight with, what is worth fighting for us and so forth.
Strengths 1) Seasoned Coffee
SHMS offers a very highly specialized and Customized Coffee which has ability to delight customers with their various choices and adjust to the changing seasons. We at SHMS will offer Coffee of all Seasons to change the mind set of people that Coffee is only Winter Product. 2) Educated Workforce
As being a service business SHMS believes its employees satisfaction is its customer’s satisfaction so it employs the most talented and educated people for its services to gain ultimate delight of the customers. 3) Global Culture
As Globalization now at every corner of the world, SHMS proactively realizing the need of our target market and we will be Following international Standards in terms of (Language, Service Standards, Interior Décor etc. and provide friendly and Energetic environment at SHMS Coffee which will be derived as competitive edge over others.
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4) Environment
We at SHMS Coffee offer the Different Themes of Environment, again with customer driven experience, which includes Friendly Environment, Romantic Environment and also Business Class Meetings. 5) Target Market (Business Class) Since our target market is business class where people
value quality more than price which SHMS is the only desired place for our target market.
6) Flavored Coffee
We at SHMS Coffee Provide Coffee in variety of Flavors with customer driven Choices, different Flavors with Customized Taste and so forth
7) Single Product Category
We at SHMS will only operate in Coffee category, will get Competitive edge by using our core competencies
Weaknesses 1) Very Limited Startup Budget Rich people having enough capital to invest in new
business and expand their operations very quickly and smoothly 2) Marketing Expenses
New business requires more marketing expenses to advertise and create awareness form connection of Brand with Customer, SHMS cannot afford more outflows since SHMS is short of budget. 3) Discrepancy between Local and Global Cultures
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Our target market is more oriented to the global culture whereas our employees are inborn local cultures. So more training and education of employees required which will turn in to one of Core Strength. 4) Insecurity of Intellectual Property
In Pakistan there is common violation of copyrights and intellectual Property theft
Opportunities 1) Market Growth
Since population is ever increasing in Pakistan and its literacy rate of youth is also increasing which will ultimately be our target market which will be an opportunity to capture the market share. 2) Availability of Efficient Labor
Due to unemployment in Pakistan the more educated people are willing to work at SHMS. 3) Increasing Trend towards Coffee
Since Coffee brand is getting more exposure to the business class and all classes all over the country it will help SHMS to achieve more ROI and sooner achieve the Break even and having potential to grow up in new markets to open more outlets in Karachi Clifton and Sadar area.
4) Globalization
Inflow and outflow of people especially business class has become faster due to globalization. It will grow SHMS coffee customer base and helps to increasing revenue.
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5) Expansion
SHMS is unique business in its entire industry in terms of Seasoned and Customized Coffee Provider to delight customer, to arrange Business Meetings and provide romantic environment, so it has golden opportunities to grow in various areas of Karachi like Clifton and Sadar and afterwards into other cities of Pakistan like in Islamabad and Lahore.
Threats 1) Brain Drain
The educated business class tends to quit Pakistan due to more favorable opportunities available in other countries and will affect in reducing Key Target customer. 2) Security issues
Bomb blasts, target killings, robbery and political strikes make businesses shutdown regularly and strongly affects the business operations of SHMS Coffee. 3) Electricity Breakdown
Fuel crises have gone up and due to continuous shut down of Electricity SHMS operations also affected and cost of providing the Services increases and customers also disturbed in their respective Meetings and so forth 4) Perception about Coffee as only Winter Product People’s perception about coffee as a winter Product, in
this regard we will make efforts to create awareness and
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change the perception to have mind set coffee can be every seasoned Product by offering Seasoned Coffee 5) Competitors Attacks
Other mammoth competitors such as Starbucks McDonalds, KFC and other local competitor, five star and seven star hotels can easily jump over a new baby business in metropolitan city with their subsidiaries.
Strengths – S
Weaknesses – W
1.
Seasoned Coffee
1.
Low Startup Budget
2.
Educated Workforce
2.
Low Marketing Budget
3.
Global Culture
3.
In Security
4.
Environment Themes
4.
Discrepancy between local and Global
5.
Product Differentiation
Opportunities – O
Culture
Threats – T
1.
Market Growth
3.
Brain Drain
2.
Availability of Efficient Labor
4.
Security issues
3.
Increasing trends to towards
5.
Electricity Breakdowns
outing and off-street Coffee Shop
6.
Perception about Coffee as only winter
Gathering 4.
Globalization
5.
Expansion in new Markets
Product 7.
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Competitors Attacks
9 Financial plans 9.1 SALES FORCAST FOR 3 YEARS
SHMS Coffee Shop Forecasted Sales for 3 years of operations
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Total
Sales Revenue Year 1 Year 2 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR 300,000 PKR 375,000 PKR PKR 3,600,000 4,500,000
Year 3 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 562,500 PKR 6,7500,000
* Forecasted sales for a day are about 10,000 which are calculated as; (Per Coffee Cup Charged 100 PKR, expected cups sales per day 100, so its 10,000 PKR revenue generated daily *30 working days in a month) = (PKR 300,000)
* The year end revenue will be 300,000*12=3,600,000 PKR annually * In second year the sales are expected to increase of 25% daily sales. (Per cup Price 100* Cup Sales per day 125) * In third again daily sales increase by 25%, per coffee cup sales Price 125*150 Cups daily)
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9.2 Financial Plan (Forecasted Financial Statements)
Our financial Plan include the investment table, three years forecasted income statement, Depreciation expenses and finally the statement of financial position which is called Balance sheet.
SHMS Coffee Shop Investment Table Year 1 Fixed Assets Prepaid Rent Office Furniture Prepaid Insurance Fixture and Interior Decor Legal Fees Total Fixed Assets
PKR 240,000 PKR 300,000 PKR 60,000 PKR 200,000 PKR 50,000 PKR 850,000
Starting with the initial fixed cost required for the business it includes the Prepaid rent for a year, purchase of office furniture and fixture, prepaid i nsurance, legal fees and the pre-paid rent which in first year costs “PKR 240,000 “. In fir st year we will have ONE Coffee Shop located in DHA phase-II, Karachi.
150,000 PKR are in working capital for purchasing the raw material and other things.
Total Budget expense 1,000,000 PKR
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9.3 PROFORMA INCOME STATEMENT FOR 3 YEARS
SHMS Coffee Shop Forecasted Income Statement Year Ended December 31 (2013-2015) Year 1 Year 2
Year 3
Revenue Sales Revenue Operational and Administrative Expenses Cost of Goods Sold Utilities expense Fuel Expense Marketing Expense Rent Expense Insurance Expense Salaries expense Depreciation Expense
PKR 3,600,000
PKR 4,500,000
PKR 6,720,000
(PKR 2,160,000) (PKR 120,000) (PKR 60,000) (PKR 100,000) (PKR 240,000) (PKR 60,000) (PKR 41,000) (PKR 100,000)
(PKR 2,700,000) (PKR 130,000) (PKR 66,000) (PKR 100,000) (PKR 264,000) (PKR 60,000) (PKR 49,000) (PKR 100,000)
(PKR 4,032,000) (PKR 140,00) (PKR 72,000) (PKR 100,000) (PKR 288,000) (PKR 60,000) (PKR 57,000) (PKR 100,000)
Total Expenses Net Operating Income Before Taxes Taxes Expense (35%)
(PKR 2,881,000) (PKR 3,469,000) PKR 790,000 PKR 1,031,000 (PKR 251,650) (PKR 360,850)
(PKR 4,849,000) PKR 1,871,000 (PKR 654,850)
Net Income
(PKR 538,350)
PKR 670,150
Details of “Monthly operating Expenses” Total 4 employees
41,000 PKR
Office Manager
15,000
Coffee Cook
12,000 PKR
Two Waiters (8,000*2)
16,000 PKR
Fuel expense
5, 000 PKR
Cost of Goods Sold 60% of Sales Revenue
Monthly Utility Expense 10,000 PKR
Monthly Rent Expense 20,000 PKR
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PKR
PKR 1,216,150
9.4 Balance Sheet
SHMS Coffee Shop Forecasted Balance Sheet Year Ended December 31 Year 1
Year 2
Year 3
PKR 240,000 PKR 300,000 PKR 200,000 PKR 60,000 PKR 50,000
PKR 264,000 PKR 300,000 PKR 200,000 PKR 60,000 PKR 50,000
PKR 288,000 PKR 300,000 PKR 200,000 PKR 60,000 PKR 50,000
PKR 850,000
PKR 874,000
PKR 898,000
PKR 150,000
PKR 126,000
PKR102,000
Total Assets Liabilities
PKR 1,000,000 PKR 0
PKR 1,000,000 PKR 0
PKR 1,000,000 PKR 0
Total Liabilities Owner's Equity
PKR 0 PKR 1,000,000
PKR 0 PKR 1,000,000
PKR 0 PKR 1,000,000
Total Owners Equity & Liability
PKR 1,000,000
PKR 1,000,000
PKR 1,000,000
Fixed Assets Prepaid Rent
Office Furniture Fixture and Decor Prepaid Insurance Legal Fees Total Fixed Assets Current Assets Cash (Working Capital)
Details of “Balance Sheet Items” Fixed Cost: Furniture
300,000 PKR
Pre-paid rent (1 year)
240,000 PKR
The Fixture & Decor
200,000 PKR
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