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Essay: Waffle company expansion analysis (inc. Porter’s, PESTLE, 7 Ps)

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  • Waffle company expansion analysis (inc. Porter's, PESTLE, 7 Ps)
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Company overview

Wonder Waffle Co. is situated in London. It has been owned and managed by two of its partners, who are equally responsible for all the loses and profits associated with the organization. Mr Patrick looks after the sales, marketing and manages the employees and the customers of the company. Miss Scarlett supervises all the financial issues of the organization. She looks after the area of finance and administration and she takes care of the operations and production sector of the organization.

The company is planning to hire four full-time waffle makers and eight employees in the post of waiters and order receivers to handle the daily customer requirements and to serve the customers.

Value proposition

Wonder Waffle Co. – Grab a bite and forget all the bitterness and tension of the day.

The company aspires to become one of the largest waffles companies of the country. The company thinks that every people prefers to have something sweet at any time of the day and having something sweet can also help to reduce their stress level. A piece of sweet waffle can reduce the bitterness and tension of the day.

Business offer

Wonder Waffle Co. aims to offer an outstanding and an entirely exclusive experience for the regular consumers of London and also it aspires to give an exceptional experience to the tourists. As they are ready to offer their products at a competitive price, it can be guessed that the consumers will prefer a good quality product at a cheaper rate, which will also enhance their experience at the café or the restaurant.

Mission

Wonder Waffle Co. aims to offer high quality waffles like parfait waffles, hot dog waffles and the Brussels waffles at a low cost so that the lower price can meet up the need of the middle class people to higher class people. Its aim is not only to attract the local residents but also to attract tourists. It aspires that by using many advanced technologies, it can become the specialty restaurant destination of the area and also aspire to create a successful and positive relationship with the customers, employees and their suppliers, who are interested in the goals of the organization.

Vision

The vision of the Wonder Waffle Co. is to serve the consumers with the best quality and tasty waffles with high-end preparation facilities and a great distribution network across the nation and as a result providing a great return on the investment of the shareholders.

Legal formalities

Getting the name of the company

The first and the most important thing to start a business is to name the business. Starting the business under a name will help the administrative ball to roll. People should not wait till they find a perfect name, because the name of the company can also be changed later.

Getting the Employer Identification Number (EIN)

EIN is actually a federal tax number, which can be used for the identification of the business. EIN is actually needed when the business involves hiring employees or when the business is not owned by a sole proprietor but by two or three partners. As the Wonderf Waffle Co. is owned by two people, IN is necessary for this organization.

Registration of the trade name

Registering the trade name for the operation of the business is very necessary. If also it is not registered under the owner’s name, it should be named under the locality or the spot. There are many other legal procedures which need to be followed before starting the business, which include getting a license for the business and getting a bank account for the business.

STP Analysis

Wonder Waffle Co. is mainly trying to focus on meeting the demand of the regular local customers as well as serving the tourists of the area.

Market Segmentation

The main focus point of the Wonder Waffle Co. is both the middle and upper income group of people, because these segments of people consume the waffles. Attracting the local residents will help in the establishment of a large customer base and will help to establish a healthy and constant base of revenue, which will provide stability in the business. Tourists mainly contribute 35% of the income of the company and to attract the tourists, the company needs to have high visibility and competitive products and services.

Targeting

The main target for the Wonder Waffle Co. is the regular local customers. Expedient and personal customer service at a competitive price is the main key to maintain the share of the local market. Its base of target market is the tourists, who can help to enhance their business.

Positioning

The company wants to place itself in the minds of the customers as an affordable place with good quality and tasty waffles. It is the place, where all the people can visit, starting from young aged to old age people.

Porter’s five forces model

Porter’s five forces model helps to identify different strategies that are required to set up a business in a certain area. These forces are mainly used to measure the competitive intensity, attractiveness and profitability of the business.

Competition in the industry

Wonder Waffle Co. has a lot of competitions in the market, because there are many other waffle companies, which who already have established positions in the market. Therefore, Wonder Waffle Co. needs to find out some strategies like quality products at a cheaper rate to attract customers.

Potential of new entrants into the industry

A company’s position gets challenged when there are new entries in the market. Wonder Waffle Co. has a lot of potential new entrants in the industry, which can become a challenge for it to sustain in the industry.

Power of suppliers

The lesser the suppliers the less the company has the opportunity to shift to other suppliers. So, the company should get a greater number of suppliers so that there is never a shortage of raw materials.

Power of customers

The lesser the customer base the more the customers hold. Wonder Waffle Co. should aim to have a large customer base so that the customers do not hold much power over the company.

Threats of substitutes

The substitutes of Wonder Waffle Co., doing similar businesses, can pose a threat on the company, because if the substitutes provide better services and products, the customers can shift from Wonder Waffle Co. to any other waffle company.

PESTLE Analysis

Political

Before opening up the organization, Wonder Waffle Co. should get a clear idea about all the political issues that are going on in the country and they should also take a note what are the structure of the government policies of that country where the owners are planning to set up the company.

Economic

The company should have a clear idea of the economy of the country before setting up the organization. Change in the inflation and deflation rate can affect the pricing strategies of the company.

Social

The social factors are very necessary to be taken care of before starting of a business. Wonder Waffle Co. should learn about the cultures and trends and values of the country before starting up the business.

Technological

Technological advancement and being tech savvy are very important for any business (Williams S., 2016). With the advanced technologies, Wonder Waffle Co. can do proper research about its customer base and can do the required development.

Legal

There are many laws and regulations, which are prevalent in one country, but may not be prevalent in other countries. So, the owners of Wonder Waffle Co. much look into all the legal issues and policies before starting up their business in London.

Environmental

Environmental factors are also important to be taken care of before starting a business. Wonder Waffle Co. should learn about the environmental situations of London before starting up the business.

7P’s

Product

Wonder Waffle Co. Should try to provide those products to the customers which have high demand in the market.

Place

The company should make its products available to those places, from where the customers will find it convenient to shop for the products.

Price

The company should adjust the prices of its products in such a way that the customers feel it to be a good value for money.

Promotion

The company should promote its products and the organizations by using different promotional mediums like social networking site, televisions, hoardings and magazines.

People

As the company runs the business of food products, the behaviours of the front-line employees like waiters, counter persons are very important so that the customers feel reliant on those employees.

Processes

The delivery of the products should be fast enough so that the customers feels happy with the services of the company.

Physical evidence

Physical evidence is very important in the food industry and people feel happy, if they can see that their foods are being prepared fresh and proper hygiene is maintained.

Operating activity

Key activities

The main idea of having personnel plan to keep the waffle business to run in steady position. There will be one operation and financial head, one production manager, one procurement manager, one Marketing Head and one Chief financial officer, who will be the key person for initial development and operation of the business process. The chief financial officer will be responsible for managing the accounts and budgeting estimation of the entire business process. The procurement manager will be responsible for the logistic part of Wonder Waffle Co Company; he will manage suppliers and develop purchasing strategies. The production managers will be responsible for the entire production from screening of raw materials to production of finished products. The Scarlett will be directing the entire operation and business process within the factory and responsible for taking strategic decision. The CEO will also be responsible for product development; he will also work as a product manager. Initially total staff members will be around 20 to 30, it can be increased during the high peak seasons. The number of head counts will be maximum around 30, because of the space and the dynamics of the waffle industry. For administration purpose, there will be one senior HR executive; he will be responsible for training, hiring, recruitment of employees and maintaining a distinct organizational structure. Under procurement manager, there will be 4 to 5 staff members to look after the entire procurement process. Under production manager, there will be around 20 staff members in the assembly line for production of three types of product line.

Production manager will also be responsible for packaging of waffles for distribution. In the packaging section there will be around 5 staff members for packaging purpose. The Marketing Head, Patrick will look after the outbound logistic part of the company and distribution channel of the company. Patrick will be responsible for product development.

Key resources

The entire assembly line, storage unit and the workforces are the key resources of the Wonder Waffle Co Company. It will consist of one central warehouse, where the finished items will be kept as an inventory for distribution to the end customers. There will be an administrative block for the official works. There will be two storage unit for storing, one storage unit will be storing raw materials required for the production of various types of product line. The other storage unit will be used as an inventory for storing unfinished products, mainly work in progress items. There will be three assembly lines for production of three types of waffles Parfait, hotdog and Brussels. There will be one central processing unit for screening of raw materials for the quality check of the ingredients required before they are sent to different assembly line. There will be two staff rooms for the staff members for resting and relaxation purpose.

Financial Planning Personnel plan

Table1: Payroll table
11
2019
2020
2021
Company Operation Head
$ 45,000.00
$ 45,000.00
$ 50,000.00
Company Marketing Head
$ 45,000.00
$ 45,000.00
$ 50,000.00
Production Manager
$ 25,000.00
$ 25,000.00
$ 30,000.00
Procurement Manager
$ 25,000.00
$ 25,000.00
$ 30,000.00
Distribution Manager
$ 25,000.00
$ 25,000.00
$ 30,000.00
Chief financial Officer
$ 25,000.00
$ 25,000.00
$ 30,000.00
Senior HR Executive
$ 25,000.00
$ 25,000.00
$ 30,000.00

The initial payroll for the entire management operation is estimated around $ 470,000.00 for past two years. In the year 2021, the entire payroll around $550000 will be increased, as the salary of all the top-level managers will increase. The staff members’ working hours are divided into dayshift and night shift. In day time, no staff will be around 30 and each staff will get around $6000 annually, whereas during night time, there will be lesser no staff around 15, as they will work on the assembly lines and each will be getting $5000, each during the first two years. All the staff members will get salary hike of around $1000 from the year 2021.

Funding

The start-up costs are to be financed by the two partners Patrick and Scarlet, i.e., the management of the company and partly by the other external investor mainly Angel investor.

Table 2: Funding calculation table
12
Staff members (Day shift)
$ 180,000.00
$ 180,000.00
$ 210,000.00
Staff members(Night shift)
$ 75,000.00
$ 75,000.00
$ 90,000.00
Total Payroll
$ 470,000.00
$ 470,000.00
$ 550,000.00
Start-up funding
Startup expenses to fund
$ 100,0000.00
Startup Asset to Fund
$ 200,0000.00
Total Funding Required
$ 300,0000.00
Assets
Non-cash assets from Start-up
$ 95,000.00
Cash Requirements from Start up
$ 30,000.00
Addition Cash Raised
$ 20,000.00
Cash Balance on starting Date
$ 25,000.00

13 Total Assets $ 170,000.00

The start-up fund includes start-up Asset to fund, which is around $2 million for the development and purchase of manufacturing platform that includes a various series of assembly lines for production of waffles. The initial start-up expenses are estimated around $1 million that include advertisement cost, payment of wages to the employees and staff members. The initial star up cost also includes borrowing cost from the angel investor, insurance, license and permit fees. The initial asset estimated around $1.7 lakh for starting up the business.

Sales Forecast

Table 3: Unit sales forecast table
Sales forecast
Y ears
FY 2019
FY2020
FY2021
Unit sales
Sales Parfait
355700
400000
450000
Sales Hotdog
300000
320000
350000
Sales Brussels
300000
300000
300000
Total Unit Sales
955700
1020000
1100000
500000
400000
300000
200000
100000
0
Unit Sales
FY2020 Sales Hotdog
FY 2019 Sales Parfait
FY2021 Sales Brussels

14
1150000
1100000
1050000
1000000
950000
900000
850000
Total Unit Sales
FY2020 FY2021
FY 2019
Table 4: Unit price forecasting table
Unit Prices
Sales Parfait
15
15
15
Sales Hotdog
20
20
20
Sales Brussels
25
25
25
Total Unit Prices
60
60
60
Table 5: Sales revenue table
Sales Revenue
FY2019
FY2020
FY2021
Parfait
5335500
6000000
6750000
Hotdog
6000000
6400000
7000000
Brussels
7500000
7500000
7500000
Total Sales
18835500
19900000
21250000

15
8000000
6000000
4000000
2000000
0
Sales Revenue
FY2019
Parfait
FY2020 Hotdog
FY2021 Brussels
Table 6: unit selling cost table
Direct Unit selling Cost
FY2019
FY2020
FY2021
Parfait
6
6
5
Hotdog
7
7
6
Brussels
10
10
10
Total Direct unit selling cost
23
23
21
Table 7: Cost of sales table
Direct Cost of sales
FY2019
FY2020
FY2021
Parfait
2134200
2400000
2250000
Hotdog
2100000
2240000
2100000
Brussels
3000000
3000000
3000000
Total Direct Cost of sales
7234200
7640000
7350000

Profit and Loss Statement

Table 8: Estimated Income Statement
16
4000000
3000000
2000000
1000000
0
Direct Cost of Sales
FY2019
Parfait
FY2020 Hotdog
FY2021 Brussels
Profit and loss
Years
2019
2020
2021
Sales
$ 18,835,500.00
$ 19,900,000.00
$ 21,250,000.00
Direct cost of goods
$ 7,234,200.00
$ 7,640,000.00
$ 7,350,000.00
Total sales
$ 26,069,700.00
$ 27,540,000.00
$ 28,600,000.00
Expenses
Payroll
$ 470,000.00
$ 470,000.00
$ 550,000.00
Marketing
$ 50,000.00
$ 40,000.00
$ 40,000.00
Rent
$ 60,000.00
$ 60,000.00
$ 60,000.00
Utilities
$ 25,000.00
$ 25,000.00
$ 25,000.00
advertisement
$ 20,000.00
$ 20,000.00
$ 20,000.00
Legal
$ 6,000.00
$ 6,000.00
$ 6,000.00

Interest $ 29,000.00 $ 29,000.00 $ 29,000.00
17
Total Expense
$ 660,000.00
$ 650,000.00
$ 730,000.00
EBT
$ 25,409,700.00
$ 26,890,000.00
$ 27,870,000.00
Tax@10%
$ 2,540,970.00
$ 2,689,000.00
$ 2,787,000.00
Profit After Tax
$ 22,868,730.00
$ 24,201,000.00
$ 25,083,000.00
$2,55,00,000.00 $2,50,00,000.00 $2,45,00,000.00 $2,40,00,000.00 $2,35,00,000.00 $2,30,00,000.00 $2,25,00,000.00 $2,20,00,000.00 $2,15,00,000.00
Profit After Tax
2019 2020 2021

The estimated sales of Wonder waffle co shows an increasing trend for past three years. Wonder waffle co.’s major expenses on payroll, marketing and advertisement. The initial obdurate expenses are low in the year 2019 and 2020 but in the year 2021 the expenses are highest.

Balance sheet

Table 9: Estimated balance sheet
18
Current Asset
Cash
$112,561
$244,331
$567,526
Accounts Receivable
$178,994
$218,742
$266,015
Inventory
$11,664
$13,163
$15,936
Other Current Assets
$102,500
$102,500
$102,500
TOTAL CURRENT ASSETS
$405,719
$578,737
$951,976
Non Current asset
Long-term Assets
$2,140,000
$2,145,000
$2,150,000
Accumulated Depreciation
$68,000
$96,000
$124,000
TOTAL LONG-TERM ASSETS
$2,072,000
$2,049,000
$2,026,000
TOTAL ASSETS
$240,000
$2,627,737
$2,977,976
Liabilities and Capital
2010
2011
2012
Current Liabilities
Accounts Payable
$163,743
$158,031
$187,776
Current Borrowing
$300,000
$250,000
$250,000
SUBTOTAL CURRENT LIABILITIES
$163,743
$158,031
$187,776
Long-term Liabilities
$1,763,332
$1,656,664
$1,549,996

TOTAL LIABILITIES $2,390,818 $2,222,726 $2,175,548

Paid-in Capital
$200,000
$200,000
$200,000
Retained Earnings
$226,833
$350,643
$613,042
Earnings
$123,810
$262,399
$427,162
TOTAL CAPITAL
$550,643
$813,042
$1,240,204
TOTAL LIABILITIES AND CAPITAL
$2,941,461
$3,035,768
$3,415,752
Net Worth
($2,150,818)
$405,011
$802,428
$35,00,000 $30,00,000 $25,00,000 $20,00,000 $15,00,000 $10,00,000
$5,00,000 $0
TOTAL ASSETS
2019 2020 2021

20
$24,50,000.00 $24,00,000.00 $23,50,000.00 $23,00,000.00 $22,50,000.00 $22,00,000.00 $21,50,000.00 $21,00,000.00 $20,50,000.00
TOTAL LIABILITIES
2019 2020 2021
$10,00,000.00 $5,00,000.00
$-
$(5,00,000.00) $(10,00,000.00) $(15,00,000.00) $(20,00,000.00) $(25,00,000.00)
Net Worth
2020 2021
2019

Wonder waffle Coo’s total asset has an increasing trend and initially liabilities is of the company will be greater than the asset. The net worth of the company in the year 2021 is negative means the company initially will have more liabilities.

Cash flow
Table 10: Estimated cash flow statement
21
Cash Flow
Cash received from operations
Cash Sales
$ 18,835,500.00
$ 19,900,000.00
$ 21,250,000.00
Additional Cash Received
Sales Tax
$ 50,000.00
$ 50,000.00
$ 50,000.00
Current Borrowing
$ 300,000.00
$ 250,000.00
$ 250,000.00
Sales of Assets
$-
$-
$-
Investment Received
$-
$-
$-
Total Cash Received
$ 350,000.00
$ 300,000.00
$ 300,000.00
Expenditure from operation
Cash spending
$ 7,234,200.00
$ 7,640,000.00
$ 7,350,000.00
Purchase long term Assets
$-
$ 30,000.00
$ 15,000.00
Dividends
$-
$-
$-
Repayment of liabilities
$-
$-
$-

Total Expenditure $ 7,234,200.00 $ 7,670,000.00 $ 7,365,000.00

The cash flow of Wonder Waffle Co Net cash flow shows the increasing trend that means the company generate cash and the project will generate good amount of revenue in the near future. The expenditure need to be reduced in order to generate more cash in the operating period.

Net Cash Flow
$ 11,951,300.00
$ 12,530,000.00
$ 14,185,000.00
Business Ratios Liquidity Ratio Current Ratios
Table 11: estimated current ratio
Years
2019
2020
2021
TOTAL CURRENT ASSETS
$ 405,719.00
$ 578,737.00
$ 951,976.00
TOTAL CURRENT LIABILITIES
$163,743
$158,031
$187,776
Current Ratios
2.477779203
3.662173877
5.069742672
6 4 2 0
Current Ratios
2019 2020 2021

The estimated current ratio for three years is greater than two, which means the company will have the ability to pay the short-term obligation and it is a good sign for the future prospective of the company.
Quick Ratios
Table 12: Estimated Quick Ratio

Years
2019
2020
2021
Quick Asset
$ 291,555.00
$ 463,073.00
$ 833,541.00
TOTAL CURRENT LIABILITIES
$163,743
$158,031
$187,776
Quick Ratios
1.780564665
2.930266846
4.439017766
5 4 3 2 1 0
Quick Ratios
2019 2020 2021

The estimated quick ratio is above 1.5 for three years which means the company have enough cash and cash equivalent. The company will have the ability to pay of its short-term debt.

Profitability Ratios
Net Profit Ratio
Table 13: estimated Net Profit Ratio

Years
2019
2020
2021
Net Profit
$ 22,868,730.00
$ 24,201,000.00
$ 25,083,000.00
Sales
$ 18,835,500.00
$ 19,900,000.00
$ 21,250,000.00
Net Profit Ratios
1.214129171
1.216130653
1.180376471
1.22 1.2 1.18 1.16
Net Profit Ratios
2019 2020 2021

The profitability ratios give the estimation about the profitability of the company and its shows a decreasing trend in the upcoming years that means the company can generate profit through the sales of its waffle product.

Gross Profit Ratio

Table 14: Estimated gross profit ratio

Years
2019
2020
2021
Gross Profit
$ 26,069,700.00
$ 27,540,000.00
$ 28,600,000.00
Sales
$ 18,835,500.00
$ 19,900,000.00
$ 21,250,000.00
Gross Profit Ratios
1.384072629
1.383919598
1.345882353

Table 15: Estimated Debt Ratio

1.39 1.38 1.37 1.36 1.35 1.34 1.33 1.32
Gross Profit Ratios
2019 2020 2021
Leverage Ratio
Debt Ratio
Years
2019
2020
2021
Total Debt
$ 2,390,818.00
$ 2,222,726.00
$ 2,175,548.00
TOTAL ASSETS
$240,000
$2,627,737
$2,977,976
Debt Ratios
9.961741667
0.845870801
0.730545847
12 10 8 6 4 2 0
Debt Ratios
2019 2020 2021

The debt ratio is very high which will be a major issue in near future the company needs to pay off its debt as early as possible to reduce the financial risk because the company can go into financial risk.
Debt to Capital Ratio

2018-8-12-1534082747

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