This is first part of Dissertation Proposal – Opening a Spanish Restaurant in Dubai. It is part of dissertation Help. This part of Dissertation Proposal Opening a Restaurant describes Significance of Developing a Business Plan
Proposal Opening a Restaurant-Introduction
With around 300,000 companies operating in the domain, Restaurant Industry has been significantly growing all over the world. Restaurant companies are nothing but the retailers of prepared food and can be segregated in terms of full-service and fast-food restaurants. (Yahoo Finance, 2013) The recent data on the industry says that there are around 8 million restaurants all across the world but still the sales of all these restaurants have been raising at an average of around 5% every year. (Reportlinker, 2013) This shows that the demand for restaurants is still going up and with an increase in the working population, the demand for prepared food is expected to not decline.
Here, we thus develop a business plan for opening a new Spanish restaurant in Dubai, the fastest growing city in the world. Known for its hospitality industry, Dubai is an extremely lucrative option for opening a new restaurant. The data for the year 2009 by TGI Survey showed that almost 74 percent of the population of UAE ate out, which demonstrates a huge scope for the food and beverages and restaurant industries to flourish in the city. (Dubai SME, 2009) Another factor that makes the restaurant industry in Dubai an extremely lucrative option is the flourishing travel and tourism in the city. With a tourism industry of more than 6 million, the city is an attractive option for opening a new restaurant with a different cuisine in the city.
The city already has a plethora of restaurants serving different cuisines and it also has a vast range of Spanish restaurants but keeping the growing demand in mind, it still seems to be a lucrative option. And hence, we would here develop a complete plan for starting or opening a new restaurant in Dubai. (Nair, 2011) We would look at different aspects of business planning and would carry out an extensive search of the industry and specify all the research and data collection methodologies that would go into the development of the restaurant to make it profitable. A complete literature review is carried out to understand the operations and functioning of the industry to proceed with different facts and figures that can be crucial in making decisions.
2. Literature Review
2.1 Significance of Developing a Business Plan
Ansoff and Anthony (1965) have considered business planning as an extremely critical and successful mechanism, which helps in establishing and implement several different controls for achieving some of the pre-defined goals. Business planning is not only crucial for the establishment of different forms of controls for achieving set goals and objectives but is also extremely important for the purpose of empowering managers to make decisions on the basis of information that comes out during the planning phase. (Porter, 1980)
Business plans are the outcomes of business analysis and planning done by the managers and decision makers and are usually made after lot of strategic thinking and planning. (Nunn, 2010) Business proposal for any company or organization are affected by a large number of variables and factors such as coercion and mimetic forces and help businesses, especially the ones in their nascent stage to grow and expand as per the plan. (Hoing, et. al 2004) Not only do the business plans provide a written step by step instructional document but also help in getting investments and loans from bank because it is a representation of the though process of the owner and says a lot about the business. (Zions Bank)
Different purposes for which the business plans are used for include analyzing the chances of success, raising capital and forming a schedule for the growth of the business. (Van Aardt, et. al 2008). Business planning is a set of processes, which include a plethora of activities such as collection and study of information, assessment of required tasks, identification of business risks management and strategies and documentation (Castrogiovanni, 1996; Sexton and Bowman-Upton, 1991) and all these activities are equally important for a successful plan and a successful business.
2.2 industry and competitor analysis
Before an entity ventures into a new business or a new industry, it is extremely important and crucial to study and understand the industry and the competitors that are there in it. Industry analysis is a set of different processes that include the study of factors affecting the structure and characteristics of an industry, which is formed by the collaboration of similar firms offering similar products or services. (Finger, 2009) The study and analysis of the industry is shown to be based on five major study of the competitors and those are the new entrants, customers, suppliers, substitutes and rivalry among competitors (Porter, 1985)
Some of the major characteristics of an industry that need to be determined before establishing a new business or venture in it are size of the market, phase of life cycle of the industry, number of rivals, entry and exit barriers, technological changes, capital requirements and economies of scale. (Ohmae, et. al 2004) SWOT analysis is one of the most commonly used tools for industry analysis. Developed by Alberty Humphrey, SWOT analysis is a very important tool for planning purposes and helps in identifying the strengths, weaknesses, threats and opportunities of an industry. (Helms, et. al 2010)
There are some predefined steps that must be used for carrying out a comprehensive industry analysis, which include the study of different technological, environmental and governmental forces that shape the industry (Kim & Oh, 2004) Porter (2008) has outlined these steps, which starts with defining the geographic scope of competition in the industry, identification of buyers, suppliers and customers, examining underlying forces of the industry, establishing the structure and also assessing the probable future changes, challenges and developments. Galbreath & Galvin (2008) has clearly established that the performances of the firms are highly affected by a sound and thorough industry analysis because it gives a basis of comparison and a starting point to the firms.
Competitor analysis is an extremely important part of developing a business plan because it does not only help in understanding the rivalry but also helps in assessing the interactive market behavior and the position of the firm in terms of competition in an industry. (Caves, 1984) There are a plethora of approaches that can be employed for carrying out a comprehensive competitor analysis of any firm, which includes statistical estimates of the costs and revenues of all competitors and also analytical study of the differentiating factors among competitors such as prices, selling prices, wages etc. (Brock, 1984)
A very commonly used approach, which can never fail in carrying out competitor analysis is the adoption of Porter’s Five Forces Model. Grant (2003), Bailey (1996) and Bateman & Snell (1996) have very effectively carried out extensive studies to demonstrate the effectiveness and applicability of the Porter’s model in different forms of industry and for carrying out different forms of assessments based on the structure, type and relative activities of the competitors.
Porter’s Five Forced Model (Porter, 1985) was developed by Michael Porter and works on five different forces that affect the competition in an industry. These five forces are the competition among the existing players, new entrants in the industry, substitutes, the bargaining power of the buyers and the bargaining power of the suppliers. For determining the sustainability of the competitors with respect to one’s firm, it’s important to understand the existing competition in the market among the currently present competitors. (Bergen et. al 2002) Understanding the view points and challenges that can be faced from the sides of buyers and suppliers is also extremely crucial and hence must be done effectively. (Holtzman, 2004)
2.3 Operations Management
For any product or service to be successful, it is important that its production and delivery to the customers are made efficient so that the companies can benefit from the profits they earn and the consumers can get better quality of outputs. Kumar & Suresh (2008) say that the process of production or operations management is nothing but a combination of various different resources and tools and techniques to develop the organization’s products and services. Not only has operations management expanded its horizons to the manufacturing and development of products but can also be implemented for different service companies and industries. (Johnston, 2005)
There are several operational attributes that define the success or failure of any business or organization and it is crucial that the businessmen understand these attributes first to build on their operational values. Harrison (2011) says that for the restaurant business to become successful, some of the main attributes that need to focused on are the experience of the managers, god quality of food, diverse manager and the retention of customers. The selection of a restaurant by the consumers is shown to be dependent on additional characteristics like location, ambience, price and also the waiting time (Auty, 1992; Jaska, 1997) and hence a business in restaurant industry needs to focus on all of this.
One theory of operations management that holds value in all scenarios is total quality management (TQM), a concept that holds high value during any strategic change. (Crank, 1995) The implementation of TQM is expected to lead to several benefits for companies, such as higher productivity, better customer satisfaction, reduction in costs and better competitive advantage. (Jablonski, 1991; Hasan & Kerr, 2003) The case study analysis carried out by Lazari & Kanellopoulos (2007) of Greece restaurants demonstrates that TQM is an integral part of the food industry because consumers always demand high levels of quality in the food they consume.
2.4 Marketing Strategy
Companies always want to achieve competitive advantage in the market and one very important way of doing that is to evolve effective marketing strategies. ((Bharadwaj and Varadarajan 1993) For the development of a sound marketing plan, a business needs to start with analyzing, assessing and segmenting the market in which it is planning to operate. The major steps involved in such market segmentation and targeting include (Hunt, et. al 2004) identifying different segments of the market, targeting particular segment(s) and developing marketing mixes for each segment.
One thing that the marketing plans should always focus on is on the development of firm’s customer equity (Blattberg, et. al 1976) The involvement of customer equity in the marketing plan helps in making the marketing strategies more accountable in quantitative terms as the impacts of the marketing strategy can then be measured financially. (Aravindakshan, et. al 2004) One important part of marketing strategy that can be used by any firm is adopting the 4Ps theory that helps in the transformation of planning into practice. (Constantinides, 2006) 4Ps involve determining the perfect positioning of four Ps of the product or service, i.e. price, product, place and promotion. (Bhuian, 1999) Hence, a business needs to assess the market and the needs of consumers and develop a 360 degrees plan to reach out to maximum audiences in the most effective way possible.
2.5 Financial Analysis
Warschauer (2001, cited in Warschauer, 2002) defines financial planning as “a process that takes into account the client’s personality, financial status and the socio-economic and legal environments and leads to the adoption of strategies and use of financial tools that are expected to aid in achieving the client’s financial goals.” There are three main functions of finance and those are planning, controlling and coordinating and all these functions are essential especially for a new business for accurate forecasting. (Enya, 2012)
A sound business plan should have special financial statements developed for reaching the established goals with completely reasonable and practical predictions of figures. (Cooper, et. al 2006) The first step that needs to be taken for financial planning and analysis of a new business is developing a budget and budgetary control measures. (Pandey, 1985) A budget is nothing but an expression of the various monetary and quantitative expenditures of a firm. (Koontz, 1985) In addition to budgeting, a new business plan should always include cash flow forecasting techniques and processes because cash is the most liquid asset of a company and hence can be used for forecasting and determining the liquidity, as well as the profitability of the company. (Paru, 2011) Thus, we see that for a business plan to be successful and to make sense and hence should include everything from the marketing plan to financial planning, operations management and study of the industry.
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