Executive Summary
Juice Shop is a new restaurant that will be established in the Taif City which is situated in the western part of Saudi Arabia. The city is good for the business of restaurants because it is the Summer Capital of the Kingdom of Saudi Arabia which lies over the Hada Mountains and on the eastern slope of Al-Sarawat mountains. This city is very well renowned for its weather, atmosphere and sceneries. Taif City is one of the most popular holiday resort which gives rise to the business opportunity to the most potential investors. The temperature of this city varies from 85 degree Fahrenheit to 95 degrees Fahrenheit which makes this place suitable for the business of beverages. Usually this business is considered to have the higher profit margins because of the nature of the product and its customer base.
Juice Shop will be started by keeping in view the business potential in the area with the vision of achieving the position of market leader within couple of years. Juice Shop mission statement is “to provide customers with a number of high quality and freshly made juices, sand witches, smoothies, and small food products in affordable prices and healthy ingredients”. Its specialty and unique selling proposition is its fresh and organic juices with the objective to quench the thirst of its customers. This will be the only restaurant in the Taif City whose core business will be to sell and deliver Juice only with a very little variation and add on depending upon the need of the season.
Juice Shop will offer a variety of beverages that will be offered for the first time in the Taif city such as hot juice, hot cream (hot ice cream) and organic juice made with fruits and vegetable. From the marketing perspective, trying for something new is the natural habit of human beings and this will be very helpful to secure the investment on this restaurant. This restaurant has a very well thought out business plan which will help in managing the issues in timely and organized manner. There will be a very efficient cost monitoring system implemented to track the expenses. Different aspects of the business are explained below:
Marketing
Juice Shop will follow aggressive marketing strategy in the beginning of the business. The purpose of this aggressive strategy is to introduce the brand among as many people as it can. In the first three year, it will use two marketing techniques. One is to pay 10% of sales as commission and second is to spend 1% of sales on Ads. Now as soon as the sales grow its marketing budget will also grow. Meanwhile, it’s marketing strategy will be reviewed periodically to keep it updated based upon the need of the time. After about a year or so it is most probable to use social media , newspaper and magazine as a new marketing and promotion technique. Its target market includes all the local people and visitors who came to that area in any time or a season. Its competitors are other restaurants; coffee shops, cafeterias and other juice shops, which are selling other different variety of products such as Starbucks, Baskin Robbins, Mama Noura, Ananasi and Tote Manga. The major purpose behind all this marketing effort is to target the untapped market which has the biggest size among all the segments. There will be a frequent market survey after every quarter which will help in determining the new products introduced in the market and the changing customer taste.
Company will adopt proper strategy for all the 4 P’s of marketing. product, price, place and promotion. Product will be initially in introduction stage of the Product Life Cycle (PLC) and in this stage it needs more promotional effort to get good word of mouth. Product will be properly packed on the demand of the customer. And while packing it will be especially taken care of that there will not be any added preservative in the juice so that its ingredients will be equally natural whenever used. It cannot be preserved for a longer period of time because in this way it’s taste will change and freshness will not remain. Its packaging will be primary in nature option will be given to the customer that whether he/she wants to take it in canned jar or glass bottle. Both will be are attractive and functional consideration will be given to the packaging. It will be having a picture of fruit which is inside it and functionally the packaging will be safer enough so that it may not get spilled in the way while carrying it from one place to another. Freshness will be given a prime importance while positioning the product so that it will create an everlasting perception in the minds of the consumers and the product will create its own image in the mind of the consumers. The limitation in this business is the seasonality of the fruits available in the market i.e. not all the fruits available in the market for the whole year. But after every 3 to 4 months new flavor will be introduced and the company will go for line extension. With the time more branches will be open in other cities as well.
Price of the juice will be fixed based upon the toping that customer will prefer. But on average it’s per unit price between SR12.00 to SR 20.00 ($1.00 = SR.3.75) There will be a discount given to its customers just to enhance the loyalty of the customers. There will be quantity discount of %10 for the customers who will purchase more than 10 units. This will be mainly to push sales. Overall pricing strategy will be cost based and demand based. It will switch with the need of the time. This will come under the main category of variable pricing strategy.
Company will be having a dynamic supply chain network to obtain fresh fruit from the market on the daily basis, sandwich bread, chicken and other small and major ingredients to meet the demand of its products. For this, restaurant will pay some advance amount to its suppliers so that there will be smooth flow of ingredients around the clock on the whole year. Promotional activities will be periodically reviewed. But there will be a quantity discount for the customers which can be used as sales promotion. After about an year or so, and based upon the sales of the product there will be direct selling on different places of Taif City. Total promotion budget for the Year 1 is SR 30,000, for Year 2 it will be SR 50,000 and for Year 3 it will be SR 70,000. Proper deals will be offered in the lunch and dinner timings. These deals will combine different sandwiches, shakes, salads and juice in different quantity. And these deals will be offered on different prices.
Financial
Juice Shop will start with the below average financial position in the first year to good in the second and third year. Its sales will start rising from SR 270,000 in Year 1 to SR 432,000 in Year 2 and SR 702,000 in Year 3. Sales will be low in the first year because it will be a newly started business and it will take some time to groom. Capital investment is the core of every business and it is the major expense in the time of startup. Company has a strategy of acquiring the shop on rent and there will be a contract of 10 year between the owner of the building and the restaurant. This will be mainly because of saving a very high cost of land and building. Restaurant will be run on rented property for the first three years and then an amount of sales will be separated every year to buy its own property.
But on the other hand it has negative operating profit and net income in the Year 1 because of startup costs and day-to-day expenses. In the Year 1, restaurant’s projected sales volume is 10,800 units while it will reach up to 28,800 units in the Year 2 and then up to 46,800 units in Year 3. Company will achieve its breakeven point in second year of its operations and then it will move towards the profitability. Restaurant has negative profit in the Year 1 and then it has net income of 30,000 in Year 2 and SR 200,000 in Year 3. The price of few of the ingredients varies with the time and variable cost per unit is SR 5.00. It is the company’s policy to sale its product on credit as well. This is mainly to handle the demand of in city office employees who prefer fresh juice in lunch or for other corporate meetings and private gatherings. The policy in this regard will be 40% of the amount will be paid in the first month, 40% in the second month and 20% in the third month. This will facilitate the company to gain sales volume and generate trial of its product. Once the product, will be renowned then this credit sale portion will be reduced to a reasonable and trust worthy customers. Just like account receivable there is a policy for payables as well. Out of the total purchases, 10% of the payments will be made in the same month, 70% in the second month and 20% in the third month. This will help the company to procure its ingredients on regular basis.
In the first three year, Juice Shop will use two marketing techniques. One is to pay 10% of sales as commission and second is to spend 1% of sales on Ads. This will come out to be a reasonably good start for the newly started company. Total promotion budget for the Year 1 is SR 30,000 for Year 2 it will be SR 50,000 and for Year 3 it will be SR 70,000. Other different expenses include expense of utilities, insurance, rent, , office expenses and maintenance. These expenses will incur on day to day basis.
Human Resource
Juice Shop has very comprehensive staffing plan for its employees. This plan incorporates everything starting from basic pay to all the fringe benefits. Number of employees will be increased with time. Initially, it will start with the president, software expert, VP sales and controller but in the immediate next year further, sales rep, VP operations, accounts manager, admin officer and delivery driver will be hired. There is a proper plan for their salaries. 15% of the salary will be given as fringe benefits to its employees. These fringe benefits will be mainly based upon the customer response after every visit. Customers will be given prime importance in judging the performance of an employee. After every visit, name of the person will be printed on the receipt who has entertained the customer. This will help in increasing the customer centric culture with in the restaurant.
Training and development plays a very important role in this business. It helps the company to get new ideas regarding the new flavors and meals preparation. New techniques will be used to prepare toppings of different fresh juices and shakes. It will help in making the meal more presentable and eye catching. There is an intense competition in the market regarding the presentation of the food and service quality. Expert people will be hired and they will be sent for the training in different cooking schools from time to time. This will help them nourishing the capabilities and skills of the existing employees. Expert persons who already have working experience in some other restaurant will be preferred at the time of hiring. The person who will prepare different juices, salads and shakes will be encouraged to try new ideas.
Operations
Juice Shop will try to achieve the exceptional customer service through its dedicated team. There are few aspects which will be especially taken care off while serving any customer. In this respect, atmosphere of the restaurant plays the vital role. Green light will be used inside the restaurant with the antique color on the walls. This will give the traditional look of Kingdom of Saudi Arabia. Operational excellence plays a very important role in the well being of a business. It will help the company to monitor the costs and keep them on an optimum level. It is the inefficient cost controls that cause the failure of any business.
Fast and quick service will be ensured by fixing serving time of the customer. There will be a time of 5 to 10 min on average to serve any customer and 20 minutes for delivery. This time will mainly vary based upon the peak and off peak hours. Proper tableware will be used to serve the customers and forks and spoons will be properly organized on the tables. Separate space will be provided to the families and the singles. Cleanliness of restaurant and kitchen will be given more importance. Fruits and vegetables for the juices will be acquired on daily basis from the fruit market so that customer can sense the freshness. Out dated and spoiled fruit will not be used in any case.
Restaurant will try to achieve operational efficiency by keeping its cost on optimum level. The startup cost would be approximately SR 90,000 and it will come in operation within 6 months from the day it will be started.
Juice Shop will start its operations in the City of Taif and it will start gaining profit from Year 2 to onwards given that the company will keep an eye on the costs of the company. The restaurant has a good business potential in the area and it will help in earning good profits in the next few years. Promotions play a very important part in this business. It not only introduces the new product in the market but also push sales. It generates trial of product to the customers. Out of the total profits, some of the money will be kept as reserve and remaining will be reinvested in the business.
1. You have provided no financials other than in your narrative. Please provide your 5 year financial statements; income statement, cash flow and balance sheet. We have posted numerous samples for you to use as references.
2. You have done a good job of describing your value proposition, but are light on discussing your competitors and their position in the market. Please do a competitive analysis relative to your choosen market. What products do they sell? What is their pricing and capacity? What is their location relative to your desired location?
3. You will need to describe your startup costs (what you need to spend to start up your juice shop) and your sources of this funding (equity / debt and from whom). Please build a table for this and provide the relevant details.
4. I am a bit concerned with your pricing. It seems high to me, although I really don’t know the local economy and competitive situation. You will better understand pricing by looking at your regional competitors.
5. You will need more data / depth in your operation plan and staffing plan. How many employees? How much are you going to pay them? Hours of operation?
6. Please include a risk & mitigation section, along with your sensitivity analysis and breakeven analysis.
SWOT ANALYSIS
SWOT analysis is very important in strategically analyzing the position of a company. This method is mainly used for strategic planning. It tells all the favorable and unfavorable aspects in any company by scanning the environment in terms of internal and external attributes where internal attributes include Strengths and Weaknesses and external attributes includes Opportunities and Threats.
Strengths
It is very important to determine the strengths and keep a constant eye on them and to evaluate them from time to time. Strengths are generally the key attributes of any company that are very helpful in achieving the goals of a company. These are generally the points of differences as compared to any other company in the same business. They are helpful in creating the basis for developing the competitive advantage for the company. Major strengths of JuiceShop as compared to its competitors are as under:
• Quality of the product i.e. fresh juices
• Service quality of the restaurant
• Packaging of the product
• Friendly environment
• Young and energetic workforce
• Prime location of restaurant
Weaknesses
Weaknesses are the attributes that are harmful for achieving the goals of the company. Weakness is generally considered as the internal factor of the company and it is considered as unfavorable for achieving the objectives of the company. Company facing weaknesses are also affected by commercially and financially. Mostly all companies have some internal deficiencies or weaknesses. The weaknesses of JuiceShop as compared to its competitors are as under:
• Not widely available in all departmental stores
• Market share
• Slow market penetration
• High price as compared to others
• Distribution coverage (since it is not available in many parts of cities)
Opportunities
Opportunities are conditions that are helpful to achieving the objective or goals of the company. Opportunities will refer to what the company has from the market that will benefit the company and these are usually external factors. The major opportunities for JuiceShop in current market situation are as under:
• Awareness of fresh juices in public
• Increasing distribution coverage (highly untapped market)
• Awareness of negative effects of cola drinks in public
• Growing trend of using fresh juices and nectars
• Market Potential (big gap of market is to be captured)
• Increasing more flavors of juice
• Increasing unique selling points
• Attractive ad campaign
Threats
Threats are the circumstances that have negative impact on any company or in severe cases may lead to shutdown situation. Some of these impacts are; decrease in market share, decrease in sales revenue, decrease in profit margins and increased competition. Generally the threats of one company are the opportunities for the companies in competition. All the companies strive to lower down the intensity of effects of threats by strategically plan their moves inside and outside the organizations.
• Recession in the economy
• Price war may result in cutting down the profit margins
• Giant competitors like Nestle etc
• Entry of a large number of incompetent players
• Fear of intense competition from big FMCG companies
• Aggressive marketing of competitors
COMPETITIVE EDGE
Competitive advantage is the key determinant of best performance which mainly ensures the positive perception, word of mouth, prominent place of the product in the market and a high market share. It is very important in knowing the performance and position of the company and to some extent it helps people in developing the perception about the products. And this is the ultimate goal of any company. Theoretically, according to Michael Porter there are three different methods of creating competitive advantage:
• Cost leadership
• Differentiation
• Focus
Cost leadership is when a product is offered at lowest price. While differentiation is when firm delivers greater services in the same price as competitors. Lastly, in focus approach companies concentrate on narrow and exclusive competitive segment. Competitive advantage is the key determinant of best performance which mainly ensures the positive perception, word of mouth, prominent place of the product in the market and a high market share. And this is the ultimate goal of any company.
JuiceShop will mainly follow “Focus” strategy in which it will concentrate on the following competitive segments:
• Product itself i.e. fresh juices
• Quality of product and service
• Presentation of the product
• Elegant packaging for those who need to take it to some other place
Above four will be the main competitive edges that are creating positive word of mouth about the JuiceShop. These are the key attributes that makes this product different from their competitors’ product.
It is very necessary for the restaurant to sustain its competitive edge in any product line because it plays a very important part in creating good reputation. Competitive advantage can make the company to stay ahead of its potential competitor. As far as JuiceShop is concerned it will not compromise on quality of its product but do polish their other competitive advantages with the passage of time.
COMPETITOR ANALYSIS
Following juice brands will be the major competitors in this industry:
• Dandanah Fruit Juice of Mahmood Saeed Company Ltd
• DXN Kiwi Juice of DXN Marketing SDN. BHD.
• Fantasy Juice of Health Food Factory
• Amazone Fruit Juice with sacs of Mahmood Saeed Company Ltd
• Rani Beverge of Khadamaty Al Thakeyah
• Maaza Juices ALJSR Global Company
These juice brands will somehow considered as competitors despite of the fact that they are not selling fresh juices because they can be used as low price alternatives.
INDUSTRY ANALYSIS
“It is worth mentioning that the annual growth rate in the production volume of the juice market in Saudi Arabia is estimated to be between 8-10 per cent. The sales of bottled and liquid juices are expected to reach 1300 million liters per year. Moreover, Saudi Arabia boasts 38 factories producing all types of juices in various sizes, and this scale of production represents more than 90 per cent of the needs of consumers within the country, according to the latest statistics.”
(Source: http://www.menann.com/article/saudis-consume-1300-million-litres-juice-annually)
CUSTOMER ANALYSIS
Satisfaction of the customers is the backbone of every small or large business. Most of the restaurants compete on this important dimension to generate higher revenues. It is the customer whose satisfaction gives a sustained competitive edge over its competitors.
“Consumption is the sole end and purpose of production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the customer”(Adam Smith cited by Jain,2000).
Customers differ in their needs and want which is also the function of time. This is the major reason due to which not any single product or service can satisfy all the people with equal effectiveness. JuiceShop will newly introduce product line of fresh juice so its customer analysis is very important to effectively and smoothly run its campaigns.
Identifying Customer
The basic step in identifying the customer is to determine their needs and wants. Basically these are the customer needs that define the market boundaries. A business should serve that market where it can profitably and easily compete with its competitors while at the same time provide a demanded product to the consumers over a longer period of time.
Basis for Customer Segmentation
There are some basics about the customer segmentation on the basis of which market is divided into different clusters whose needs and wants differ. This portion will be discussed in detail in customer segmentation. Some basic dimensions of customer segmentation are as under:
• Demographic factors (age, income, sex, etc.)
• Socioeconomic factors (social class, stage in a family life cycle)
• Geographic factors
• Psychological factors (lifestyle, personality traits)
• Consumption patterns (heavy, moderate, and light users)
• Perceptual factors (benefit segmentation, perceptual mapping)
• Brand loyalty patterns (Jain, 2000)
JuiceShop will mainly segment its customers on the basis of demographic factor that especially include income because it is a high price product as compared to others.
Market Segmentation
Market segment is one of the clusters of the customers where needs are generally common. In general JuiceShop segment its customers on the basis of demographic factor i.e. income.
Customer Demographics
Demographics help the company judge the profitability of a particular segment. Customers of JuiceShop will have different demographics depending upon the category where they are lying. It includes all the necessary measurement that is essential to statistically define the end user-base in any market. It also reflect customer attitude towards different products. Following dimensions are considered to be necessary while analyzing customer demographics:
• Income level or Purchasing power
• Age
• Residences
• Means of transportation
• Family status
• Lifestyle
JuiceShop at the time of segmenting its customers will take income as a major factor while life style as a secondary factor.
Customer Needs and Wants
The customers who will visit JuiceShop will have different set of needs and wants. It is very difficult to accurately predict it because it is a newly introduced product. People are not fully aware of this. People who buy this seem more casual and in leisure mood. Their needs and wants cannot be judged. Few are in search of chilled beverage, few want something cold and sweet in the hot weather, few of them want some fruit juice to avoid bad effects of colas.
Served Market
Served market is where any company actually serving its customers. JuiceShop is a new restaurant that will be established in the TaifCity which is situated in the western part of Saudi Arabia. The city is good for the business of restaurants because it is the Summer Capital of the Kingdom of Saudi Arabia which lies over the Hada Mountains and on the eastern slope of Al-Sarawat mountains. This city is very well renowned for its weather, atmosphere and sceneries.Taif City is one of the most popular holiday resort which gives rise to the business opportunity to the most potential investors. The temperature of this city varies from 85 degree Fahrenheit to 95 degrees Fahrenheit which makes this place suitable for the business of beverages. Usually this business is considered to have the higher profit margins because of the nature of the product and its customer base.
MARKET DEMAND
“An economic principle that describes a consumer’s desire and willingness to pay a price for a specific good or service”.
Market Demand is only effective when it is combined with the ability. Over the last few decades consumer interest has been changed from carbonated drinks to juices and nectars. Traditionally, juices were considered as breakfast drink but these days trend has been changed, large extent of beverages have been replaced by juices and nectars in the rest of the day.
The main reason for the change in the consumer interest is because of the health consciousness. This has created a considerable interest in the natural, pure and health food products. This factor is the main reason of the boom in the sales of the juices. World trade in fruit juice concentrates and pulp has increased exponentially and it will continue its upward trend over the next several years. According to one report:
“World trade in fruit juices increased nearly fourfold between 1977 and 1988, reaching US$4 billion that latter year. Although import demand for these products may not experience the same growth over the next several years as in the past, international trade in these items is expected to rise over the coming period. Developing country suppliers accounted for around half of the total traded on the world market in 1988, or about $2.1 billion. They should be able to expand their share in these sales in the future, given increasing consumer interest in tropical fruits and their use in various food products.”
There are two different types of demand exist in JuiceShop market i.e. existing and incipient. Existing demand occurs when a product is bought to satisfy a recognized need. While incipient demand occurs when certain trends lead to the emergence of a need of which the customer is not yet aware. Apart from the health consciousness there are other different factors that play their role in determining the demand of juice. These factors are as under:
• Season
• Weather
• Living standard of the people
• Quality of the product
• People’s expectation
These were the few determinants that overall determines the demand of the fresh juice in its target market. The degree of competition in this industry is moderate. Companies strive for quality rather than price. Because in juices quality is the main factor and determinant of customer demand.
OPERATIONS
Company will be having a dynamic supply chain network to obtain fresh fruit from the market on the daily basis, sandwich bread, chicken and other small and major ingredients to meet the demand of its products. Fast and quick service will be ensured by fixing serving time of the customer. There will be a time of 5 to 10 min on average to serve any customer and 20 minutes for delivery. Proper tableware will be used to serve the customers and forks and spoons will be properly organized on the tables.
PRICING
Price of the juice will be fixed based upon the toping that customer will prefer. There will be a discount given to its customers just to enhance the loyalty of the customers. Pricing will vary among different flavors. It will change with the changing fruit prices in the market. There will be quantity discount of 10% for the customers who will purchase more than 10 units. This will be mainly to push sales. Overall pricing strategy will be cost based and demand based. It will switch with the need of the time. This will come under the main category of variable pricing strategy.
7.


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