Discuss About The Evaluation A Business Pasta Tree Business?
A business plan can be defined as a written description of the future of the business i.e. a document that clearly describes the plan to do and how it is planned to be done. Business plan is in general used by the investment seeking entrepreneurs for conveying their vision to the potential investors. On the other hand it is also used by the firms trying to attract key employees, prospect for new business, deal with the suppliers or simply to gain an understanding of how the company can be managed in a better way.
Thus, it becomes important that a good business plan should be capable of conveying the business goals and the strategies for achieving the business goals together with the problems that the business might encounter and the ways in which the problems can be resolved together with the organizational structure of the business, the capital required for financing the venture and keep the business going until the break even is achieved. So typically, a good business plan consists of three parts, where the first part include the business concept that provides information in context to the industry, the business structure, the products and services and the plan for making the business a success, the second part include the marketplace section that provides information in context to the potential target customers, the positioning strategy and the completion that the business would face. The third section include the financial section that provides information in context to the income and cash flow statement, the balance sheet and the other financial rations and break even analysis.
Thus, taking into consideration the above aspects, the present assignment focuses upon evaluating the Business Plan of the Pasta Tree operating in Sydney and planning to expand its operation and production to meet the increased product demand in the market.
External Environmental Analysis for Pasta Tree
The analysis of the external environment can be done with the help of PESTLE Analysis Framework that would prove to be beneficial in identifying the factors that that can have a significant influence on the operations of Pasta Tree while operating in Sydney.
Australia is characterized with a stable political climate that significantly contributes towards the growth of the businesses operating in the food industry in the last two decades. The country is also characterized with a transparent legal reference that has been designed for eliminating corruption. The Australian Competition and Consumer Corruption (ACCC) established in the year 1995 provide a fair ground for equally protecting the rights of both the consumers and the businesses. Australian government has also vested authority for enacting price control laws and enactment of the Competition and Consumer Act 2010 has led to the empowerment of ACCC for reviewing industrial pricing (Rogerdarlington, 2016). The federal tax incentives strive towards targeting the investment translates for substantial net economic gain for the country and thus the government imposes a flat corporate rate of 30% on the net earnings in addition to goods and service tax (GST).
Thus, it can be said that while operating in Sydney, Pasta Tree would have to abide by the tax laws and the regulatory laws in context to pricing and had to operate ethically for maintaining an image of an ethical brand. So, where fair, supportive and transparent government policies would be beneficial for the business, the avoidance of regulations would lead the business to troubles in terms of fines and financial losses.
Australian economy experienced a decline of 0.8% in the year 2009 from 2.3% in the year 2008 and since then the economy has retained its optimistic speck. Since then, Australian economy recorded a growth of 3.7% in the year 2012, 2.5% in the year 2013 and an adjusted 2.8% in 2013 (the Guardian, 2016). However, it is also noticeable that the economy is yet to free from the scare of the inflationary risk since it has been observed to remain elevated above the target of 3% set by the Reserve Bank. Moreover, the volume of the food industry is expected to increase and the recovery of the economy driven by the consumption expenditure on the part of the people reveals the fact that the Australian population is going to continue its habit of eating out and consuming fast food like pasta (Lang & Heasman, 2015). The EMMA survey reveals the fact that Australians are making around 51.5 million visits to the quick service restaurants and around 11.9 million of the 51.5 million are visiting fast food outlets. So this is driven by increase in disposable income of the population (Good Food, 2014).
Thus, it can be said the economic factors where at one hand is favourable for Pasta Tree through increased disposable income and growing food industry, on the other hand is also going to pose a threat in terms of high inflation rate making the raw materials and transportation costly thereby increasing the cost of operation of the business.
Australia is facing the risk of baby boomer generation that is gradually attaining older age and so the government has introduced welfare to work schemes that encourages the older generation to remain in employment even after they have qualified their old age annuity (Abs, 2017). So this assists in retaining the increased consumption expenditure thereby encouraging expenditure on eating out and purchasing take always. Moreover, the population between 14 to 29 years are observed to have high preference for fast food and dining out (Good Food, 2014). However, there is an increased awareness towards healthier eating among the population and so they are willing to pay for balanced dietary and prefer healthy foods.
Thus, where aspects like increased tenure of employment together with increased preference for dining out can prove to be beneficial for the pasta business, the demand for healthy diet can pose a certain level of challenge. Thus, in this context, Pasta Tree needs to focus upon putting healthy ingredients in pasta and promote it as a healthy on the way food.
With technological advancements across the globe, it becomes important for the businesses to adopt the advancements into their production and marketing activities. So, where with advancements in technology, Pasta Tree can get engaged with the customers through social media networking sites and understand their tastes and preference to modify their products, it would have to implement technological advancements in its production facility. This would demand investments and thus the business would have to be strategic in its approach.
Australian government and state and territory government legislations are in place for protecting the environment, the community and the consumers and promoting fair competition and trade. These laws govern the business in context to the ways in which they should interact with the customers, suppliers and other businesses. Australia is characterized with a national statutory framework for ensuring fair trade for businesses and consumers and it is administered by the Australian Competition and Consumer Commission (ACCC) (Austrade, 2016). The Australia Consumer Law (ACL) also implements regulations in context to unfair contract terms, guarantees the rights of the consumers, product safety laws, unsolicited consumer agreements, lay-by agreements and penalties. Australia is characterized with statutory framework for regulating product safety and information standards for ensuring that harmful products are not marketed in the country. It is enforced by ACCC (Austrade, 2016).
So, Pasta Tree while operating in Sydney would have to abide the regulations and legislation mentioned above.
The Australian government together with state and territory government and local governments strove towards administering environmental protection jointly (Austrade, 2016). It guides the businesses to remain environment friendly by reducing their carbon footprint and adopting recycling process and adopting processes for minimizing waste.
Thus, Pasta Tree would have to take care of the environmental laws and regulations and would have to operate as an environmental friendly business by reducing its carbon footprint and adopting ways for reducing waste and encouraging recycling.
Evaluation of Pasta Tree Business Plan
In addition to the above aspects, while evaluating a business plan, it is important to identify whether the plan has successfully answered certain primary questions or not.
Is the business plan well throughout?
Analyzing the Pasta Tree Business Plan, it can be said that the plan is well throughout since it clearly follows a structure that is appropriate for designing a business plan. The plan is characterized with the following aspects:
This section provides detailed information about the ownership, history, past financial performance and justification on context to the strategic location of the business.
The product section provides a detailed overview of the offerings of the business.
This section details the market segmentation strategy and the targeting strategy of the business together with detailed analysis of the prevailing competition in the market and an analysis of the buying patterns of the customers.
This section provides information in context to the advertising strategy that would be adopted i.e. advertising with 20% off regular price coupons and in store displays and sponsorships. Detailed information is also provided in this section regarding the sales strategy i.e. the products would be presented in the market as an affordable upscale dinner item that is easy to make and tastier and healthier than other fast food products. The section also provides a sales forecast for three financial years.
This section also clearly provides information in context to the milestones that business needs to achieve for tracking its progress.
The management summary provides a brief description of the background and experience of the owner and co-owner of the business and also provides information regarding the other key personnel that include the production manager, sales manager, production staff members (2 existing and 2 newly hired), store staff and delivery staff. The personnel plan has been presented for three financial years that clearly illustrates the expenditure of the company its employees in terms of remuneration.
The financial plan of the business provides the break-even point of the business i.e. $24989, the profit and loss statement for three financial years, cash flow statement for three financial years and balance sheet of three financial years (Der Foo et al., 2009). The business plan is also provides information in context to business ratios that illustrates the expected performance of the business.
Thus, it can be said that the business plan has been strategically designed in order to provide all the relation information in context to the expenses of the business together with its performance over a three years period. So, this would prove to be beneficial for the business to attract employees and also the investors and avail loan from financial institutions.
What is the legal structure of the business?
In context to the legal structure of Pasta Tree, it has been observed from the business plan that the pasta Tree would operate as a general partnership firm involving Jill Forma and John Wintage who would be responsible for performing management responsibilities.
What are the strengths of business plan?
- The business plans reveals that the firm is characterized with increasing sales in the past.
- The assets of the business have also increased over the period of time from $38,000 in the year 2001, $50000 in the year 2002 and $128488 in the year 2003.
- The total liabilities of the business have reduced from $35000 in the year 2001 to $31000 in the year 2002 and to $23000 in the year 2003.
- The business is stretgically placed for perfect foot traffic and the location is also a quick access to the city’s freeway system.
- The business is characterized with a wide range of product portfolio and strategically would target the urban professional market segment who do not have time to prepare dinner.
- The owners i.e. both the partners Jill Forman and John Wintage have fifteen years of prior experience in food production and sales that can prove to be added advantage for the business plan.
- The projected financial indicators highlight strong and steady performance of the business in the future.
What are the weaknesses of business plan?
- The business would have to avail a loan of $50000 for funding the expansion plan and the business plan do not provide information in context to how the funds would be collected.
- The business plan also lacks detailed description of the skills and talent required for the expansion plan.
- The business plan does not provide SMART objectives Fern?ndez-Guerrero, R., (Revuelto-Taboada & Sim?n-Moya, 2012).
- The business plan lacks industry analysis since it does not reflect the use of Porter’s Five Force Analysis.
- The business plan provides financial indicators without any explanation towards what these financial indicators speak about the expected performance of the business.
- The business plan also does not provide illustrations in context to the difficulties to be overcome while progressing with the plan (Ford et al., 2010).
- The business plan has mentioned its product portfolio but lacks the marketing 4Ps.
- The plan has illustrated the product portfolio but does not illustrate its pricing strategies that make the financial plan difficult to understand.
Is the plan realistic?
The business plan of Pasta Tree can be considered to be lacking in aspects like SMART objectives, product pricing strategies and so it can be considered to be realistic in nature (Chwolka & Raith, 2012).
Does the plan demonstrate how it is going to measure its objectives?
Even though the plan lacks SMART objectives, it has provided milestones plan that illustrates the ways in which the objectives to be achieved can be measured.
Does the plan demonstrate how the business intends to be profitable?
The plan illustrates that the product would be advertised with 20% off regular price coupon during the first month of product introduction into the supermarkets. It would adopt in store displays to hold the coupons and attract customers. It would also sponsor City’s Canal Run and distribute its coupons during the event. The product would be positioned as an affordable upscale dinner item that is easy and quick to make and tastier and healthier than other fast food products. The plan also provides the fact that the products would be made available through supermarkets and small grocery stores for convenience of customers and would target the urban professionals who does not have much time to cook. Thus, it can be said that the business has successfully planned the ways to attract customers and generate sales to make the business profitable.
Are the future projections backed up with reliable data?
The business plan has provided perfected sales; profit and loss and cash flow and the projections are based upon its past performance. So, it can be said that projections are backed up with reliable data.
Thus, from the above evaluation, it can be said that the business plan is realistic in nature, however it demands more research and perform analysis with the help of tools like Marketing 4Ps and Porter’s Five Forces together with the pricing strategies to be adopted that would prove to be beneficial in projecting a more realistic picture of the business plan and enhance its credibility of collecting funds from the financial institutions.
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Der Foo, M., Wong, P. K., & Ong, A. (2009). Do others think you have a viable business idea? Team diversity and judges' evaluation of ideas in a business plan competition. Journal of Business Venturing, 20(3), 385-402.
Fern?ndez-Guerrero, R., Revuelto-Taboada, L., & Sim?n-Moya, V. (2012). The business plan as a project: an evaluation of its predictive capability for business success. The Service Industries Journal, 32(15), 2399-2420.
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