Purpose of the study
- This study mainly aims to provide a justification for an investment in tourism sector in the UK. This will be in form of a feasibility study.
- The feasibility study will include SWOT analysis to identify the strengths, weaknesses, threats and opportunities for the business as it enters UK tourist market and industry.
- The study will also analyse the tourist market to determine the suitability o its environment for a successful business
- Another purpose of this study is to provide the business concept and product development concepts so as to determine if the business will succeed in the market.
- The study also determines the financial feasibility of the proposed business
UK is ranked 7th among the biggest tourism destinations in the world. Among the famous tourist cities in the UK are Sheffield, Don Caster and Wakefield. With about 29.2 million tourists visiting the UK in 2011 and a predicted increase in the number of tourists in future, investment in the tourism sector becomes a very attractive venture for investors. Both domestic and international tourism are common in Sheffield, making the town very attractive for businesses. The common tourist attraction sites include Cultures and arts, waterways, museums, religious sites, gardens and parks. Currently, there are many Cafes, restaurants, Boutiques, coffee and fruit parlous as well as retail shops serving the immense number of tourists visiting the city throughout the year.
To achieve its purpose, this paper will use secondary data to analyse the feasibility of the business concept in meeting profitability objectives. Data will be gathered from many websites that provide information about the UK’s tourist market. The secondary research will provide information about the customer trends, competition in the market, industrial trends and environmental feasibility. This data will then be analysed, evaluated and presented clearly so as to illustrate the feasibility of the business in an unquestionable manner.
The business will be based in Sheffield where UK’s heart of art is based. Many tourism activities in Sheffield have enabled businesses to thrive. The choice of Sheffield has been occasioned by the fact that despite increased demand of food and drinks due to the rise of tourism activities, there are still untapped business gaps. There are cafes and coffee parlors in the city already but the increased demand from tourists has never been completely met. Sheffield is a home of artifacts and culture exhibits which attract both domestic and foreign tourists. This has led to increased demand of food and drinks in the city. Therefore, it is important to implement the business idea and concept in Sheffield.
- Good customer service that establishes a good customer relationship
- Courteous and understanding staff which attends to customers kindly.
- Innovative food technology to enhance quality such as preservation technology
- Availability of all types of food and drinks and under one roof
- Enough space to accommodate many customers at the same time
- Subsidized health care services for visitors within the business premises
- Customized packaging of food and drinks for travelling customers
- Little popularity among customers due to its newness in the market
- Small pool of suppliers due to its newness in the market
- High cost materials used to produce food and drinks
- Small economies of scale in the initial stages of the business
- Availability of sufficient skilled personnel in the food and drinks industry
- Increased number of tourists visiting UK. VisitBritain website argues that tourists visiting UK from Brazil, Russia, India and China are expected to rise sharply (BBC Business News, 2012).
- Improved technology in the food and drinks industry
- Increased popularity of the English Premier League across the world which is likely to attract more tourists to UK (BBC Business News, 2012).
- Sheffield environment gives tourists a relaxing ‘well-being’
- Availability of many tourist attraction sites in Sheffield such as art galleries and museums which attract tourists.
- Threat of world economic and financial crisis which may reduce the number of tourists visiting UK, e.g. the world economic crisis of 2011
- Competition from other Cafes and drinks centers such as Blue Moon Café and Fusion Organic Café (Sheffield City Council, 2012).
- Relative weakness of the Dollar against the Pound. This leads to reduced tourist visitors from USA which has been the leading source of tourists visiting UK.
- Competition from other cities and countries such as Dan Caster, Swansea and Wales.
Tourist Market and Competition
Figure 1: Factors affecting Tourism Trends in December 2012 (VisitBritain, 2012)
There are many factors affecting tourism in UK, leading to fluctuating trends in UK tourism. These factors are illustrated in the figure above. From the trends in factors affecting tourism shown above, it is clear that tourism in UK is influenced by weather, transport news, domestic economic news, European Economic news, US economic news, Global Economic news and tourism news.
- Temperatures across UK remained within normal levels in November while rainfall nearly double in most parts of the UK including Sheffield.
- Fog which normally occurs in UK leads to cancellation of some flights to London (VisitBritain, 2012). This affects travelling plans of tourist visitors to UK.
- It has been forecasted by IATA that air passengers will increase in number from the current 2.8 billion in 2011to 3.6 billion in 2016. The new passengers are expected to include 500 million domestic passengers and 331 million international passengers (VisitBritain, 2012)
- International air traffic in Europe has also been reported to increase by 2.6% over a period of one year until October 2012.
- This overall increase in number of flights to UK indicates that there is an increased number of tourists visiting the country.
Domestic economic news
- UK unemployment had decreased by 82,000 by October 2012 (VisitBritain, 2012)
- UK inflation rate is also stable and the rate recorded in November 2012 was 2.7%
European Economic news
- German’s Bundesbank has predicted that Germany’s economic growth will reduce in 2013 to 0.4% and increase in 2014 by 1.9% (BBC, 2012).
- European Union signed a free trade agreement with Singapore which will boost trade between UK companies and the city of Singapore. This may lead to tourism boost from Singapore to UK.
- US Economic news
- Negotiations are almost complete to avert the fiscal problems facing the US economy following a rapid increase in tax and substantial cuts on spending. Spending cuts and increased taxation had caused fiscal problems making tourists not to afford travelling expenses to the UK. Negotiations to reduce these problems will increase the number of tourists travelling to the UK.
- World economic news
- Chinese economy is expected to grow by 8.4% in 2013. This may boost Chinese tourists’ potential to travel to tourist destinations such as UK.
- Tourism news
- London is reported to have about 641 luxury rooms under construction while occupancy rates for the segment in the first ten months of 2012 averaged 78.1% (VisitBritain, 2012)
Accommodation and activity and rates
- The available accommodation services in Sheffield include Hotels, Self-catering, Camping and Caravans, and Hostels (Sheffield City Council, 2012).
- Healthy Nutrition Cafes (HNC) targets tourists in self-catering, Camping and Caravans, and Hostels.
- Hotels offer food and drinks just like HNC, so they will act as competitors to the business.
- Some of the competitors who offer accommodation services are shown in the table below. The table also shows the accommodation rates for various hotels.
|The Leopold Hotel||Leopold street, Leopold square, Sheffield.||50-775|
|Best Western Plus Mosborough Hall Hotel||High street, Mosborough, Sheffield.||58-175|
|Rutland Hotel||Glossop Road, Sheffield||65-225|
|Padley Farm B & B||Blonk Street, Sheffield||64-82|
|Throapham House Bed and Breakfast||Oldcotes road, Throapham, Sheffield||75-95|
Fig 2: Accommodation rates in major hotels in Sheffield (Sheffield City Council, 2012).
- Healthy Nutrition Café will not establish its business in areas where these hotels are located. Instead, it will target areas where hostels, camping sites and self catering activities are located.
- The main target of the business is hostels located in Sheffield such as University of Sheffield and Primrose Cottages hostel. University of Sheffield is located in Endcliffe village while Primrose Cottages is located in Queens Road, Beighton.
- Main branches of Healthy Nutrition Café will therefore be located in Endcliffe village and Beighton so as to attract tourists who reside in University of Sheffield and Primrose Cottages.
- Accommodation rates for University of Sheffield are £36 while the rates of Primrose Cottages range from £14 – 16.
- Therefore, most tourists will use Primrose cottages and University of Sheffield for accommodation. It is therefore important to locate HNC near these hostels.
Potential market sectors
- The market sectors that the company will target include domestic and foreign tourism catering sectors.
- Healthy Nutrition Café will offer food, drinks and health services to tourists touring various parts of Sheffield.
- Tourists demand food and drinks during their outdoor leisure, so they require packaged food and drinks which Healthy Nutrition Café offer
- The café will also offer its products and catering services to other members of Sheffield community including university students in Sheffield universities such as University of Sheffield.
- The business will also target local residents of Sheffield who prefer readymade food and drinks.
- The business further targets customers with high demand for hot drinks such as coffee during winter season when the weather in Sheffield is very cold.
Physical Development Concept
Indicative Development Concept
Product/service development plan
- Healthy Nutrition Café will offer the best food and drinks to tourists and other residents of Sheffield.
- The food will be prepared by the best nutritionists to taste perfect.
- Food will also be in various categories ranging from Vitamins, Carbohydrates, Proteins and fats. This provides a balanced diet to the customers and ensures that all customers get whatever type of food they desire.
- The food will also be prepared in several customized styles to suit the requirements of all customers. For instance, tourists from USA are offered American food and drinks while the domestic customers will be offered English food (Boniface, 2003).
- The food and drinks will also be packaged according to customer demands for those customers who wish to carry them while in their leisure activities outside the café.
- Perishable food are also preserved using special preservative technology so that the food may last for as long as possible without perishing. This technology will keep food which would have lasted only for a day fresh for 3-5 days.
- The Cafés will also be located in a good environment and near a tourist attraction site such as art galleries, parks and gardens.
- The location of the cafes will be points where there is a fresh air and good view point for the customers to enjoy their meals in the most luxurious and happy ways possible.
- The premises of the café will also be expansive and carry a large space so that the customers may enjoy a big space to move around, relax and avoid congestion.
- The dining rooms will also be decorated right from the corridors to the interior parts of the cafes so as to attract customers.
- Reception in the cafes will also be perfected by outstanding respect and courteous language from ever-neat uniformed waiters (Bryan, 2002).
- Health services will also be provided for the customers either free or subsidized.
- Healthy Nutrition Café understands that healthy food is good for a healthy body free of diseases. So as our customers take our healthy food, we ensure that they don’t leave with unhealthy bodies.
- Providing health services will enable the customers feel secure while using our food and products rather than those of competitors.
- To meet the objectives of Healthy Nutrition Café, there will be a strong supply chain which ensures that the products and services of the company are made available to the customers as at when and how they want them delivered.
- The supply chain will involve a number of operations which start from the transformation of the raw materials to edible food and drinks. This includes cooking, brewing, boiling, etc. These activities will be carried out by specialized staff that has the knowledge and skills in food preparations.
- After the food and drinks have been transformed into finished products for the purpose of consumption, they are packed, packaged and served to customers by yet another pool of experienced and staff.
- Packaging will be done by different staff from the waiters who serve the customers in the company’s premises.
- Pricing of the company will also be a crucial task of the operation team. The prices will be maintained at lower levels than competitors by minimizing costs. This will generate greater demand and increase the customers of the newly started business (Kotler, 2011).
This project is accompanied by its own costs. Product development is therefore also accompanied with development costs. The specific costs for the operations of the company will be mainly production costs. These are shown by the table below which indicates the expected annual operation costs f the company.
|Operation||Annual cost ($)|
|Administration of complaints from customers||23,000|
|Auditing and quality control||43,500|
|Packaging of food and drinks||25,000|
|Costs of raw materials||39,500|
The business concept will be approved by a founding/management team formed from a group of skilled and competent personnel to run the operations of the business and run supply chain management of the Café. The management board that will approve and oversee the operations of the business will be formed from various departments of the company’s organizational structure. The company’s organizational structure will be made of five departments. A director will be drawn from each department to be part of the company’s executive board which will manage the company’s operations. Each department director will be responsible for the running of activities related to the respective department. The following are the members of the Café’s executive board who will manage the operations of the business and approve the activities of the company.
- Chief Executive officer (CEO)
- Director – finance department
- Director – customer service department
- Director – sales and marketing department
- Director – operations department
- Director – Human Resource Department
The validity and the activities of the company will be approved in a board meeting where the feasibility of the business will be determined. The feasibility of the company will be established after the operations director explains to the board all the supply chain activities involved, the costs and the benefits to be accrued (Tonge, 2008). A vote will be carried out by the five directors from each department on whether to agree with the project and if the majority approves of the project, the café’s development starts immediately.
Apparently this is the most significant part of any business. It determines the business’ cash management capability, profitability, cost structure and revenue. In order for the business to achieve its primary objectives, there should be an effective management of finance (Tonge, 2008). There should be a good budget and financial management strategies. The pro forma income statement of Healthy Nutrition Café is illustrated in appendix 1. This appendix shows monthly income statement for one year. The appendix indicates that the company will incur more costs and attain small profitability levels at the beginning but they will increase as the months proceed. For instance, the profits in February will be expected to be negative but by December the profit will have risen to £14,802. The company is expected to have attained this profitability position after 12 months. This will be attained if the finance department keeps the operations on track of budgets throughout the year.
Summary and Conclusions
This business concept has come at a time when tourism is on the rise in UK. The increased number of tourists has occasioned the need to meet their food and drinks demand which proves to be on the rise in Sheffield. Despite the fact that there are competitors in the UK, there is definitely a gap in terms of foods and beverages which has not been tapped in the UK. Healthy Nutrition Café has been designed to fill this gap. The business will provide all types of food so that customers with different tastes and differences whether individually or in groups may be able to get his/her favourite food and/or drinks under one roof. The company will utilize quality and preservation gap by providing better quality than competitors and keep its food to last longer than them as well. This enables the company to be ahead of competitors and gain competitive advantage in the company. The company will also offer health services to the customers of the company as supplementary services so that the company may enjoy regular pool of customers. This idea has not been tapped in the market and may enable Healthy Nutrition Café to gain competitive advantage over its competitors. The services offered will also be provided by the best waiters who attend to the customers in the best way so that they will always feel at home. The premises are also kept spacious so as to accommodate many customers at the same time and provide a free space for customers to enjoy fresh air.
It is clear from this business concept that with appropriate adherence to the requirements of the feasibility study high profitability will be realized. With appropriate implementation mechanism and regular evaluation and monitoring, the business will flourish and attain the profits indicated by the pro-forma income statement of this feasibility study. However, this may not be realized if the project does not get the approval of the founding team. The founding team will evaluate the feasibility and upon approval, this project is expected to attracted the highest expected level of profitability.
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