Business Plan for Hera Bakery: A Case Study in Engineering Economy, Assignments of Engineering Economy

Download Business Plan for Hera Bakery: A Case Study in Engineering Economy and more Assignments Engineering Economy in PDF only on Docsity! GATAUX BUSINESS PLAN Professor: Nguyen Hoang Huy Group 4 International.University, Vietnam National University - HCMC PROJEGT OF THE COURSE: ENGINEERING ECONOMY Our completion of this project could not have been accomplished without the support of our advisor Pro. Nguyen Hoang Huy for providing invaluable guidance, comments and suggestions. We would like to express our special appreciation to Teaching Assistants who are willing to help us both in lab and outside school. International University, Vietnam National University — HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY l. INTRODUCTION 1. Conceptualization Food and beverage services sector eg contributes a great deal to the profits in the hospitality industry. Due to the increase in importance of business meetings, there are a range of personal and social events and a large number of customers visit catering to intensify customers’ experience through their service. Consumption of food and drink products accounts for about 15 percent of Vietnamese GDP, and this percentage is forecast to rise in the future. Furthermore, Vietnam is expected to become one of the top 3 Asian countries by 2020. As it is supposed that the F&B industry will be one of the most prominent growers in Asia, the Vietnamese food and beverage sector happens to be even more appealing to foreign investors. Especially, the bakery industry in Vietnam has shown a fast growth in recent years. In 2019, in addition to the expansion of large chained outlets such as BreadTalk, Tour Les Jours, and ABC, independent small grocers (such as small baker shops) were also seeing healthy growth in urban and rural areas. The expansion of these outlets, in particular, generated stronger growth in unpackaged baked goods at the expense of some packaged products. That year, the market enjoyed compounded annual growth of 20-30 percent and was worth 700 million USD. International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY Many types of baked goods are consumed not only as meals but also as snacks that temporarily satisfy hunger especially when on the go, or when at work or school. Baked items are comfort foods that can be prepared as very nutritious ad tnasty, which means that those products have a wide range of customers, from children, adults to even the elderly. Those are all the reasons why our group chooses to elaborate on the plan to establish a bakery shop. International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY 2. General introduction a) Objectives The main objectives of the bakery shop are to: - Making and maintaining a level of profit - Defining and reaching a target clientele. - Build a sustainable operation to create a social media, community events, and local promotional opportunities to attract loyal customers and generate a consistent sales volume. Other aims are to: - Minimize waste and help the community. - Provide quality baked goods to our customers. - Monitor profit margins, or the percentage of sales that exceed operating expenses b) Mission - Create a bakery which makes the best quality baked goods on-site from scratch, fresh daily. - Create an atmosphere where we can attract, retain and motivate the brightest and most talented people in the industry. - Create an atmosphere where employees can learn, grow, and innovate while holding true to the roots of traditional baking. - To create an inviting warm atmosphere for our clients and customers to be able to purchase their baked goods. c) Vision - Continually innovate in the baking industry while continuing to make everything from scratch on-site. - Educate our staff and the public about the importance of chemical-free baking and where the food comes from. International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY Table II.2.2: Table of competitors analysis Brand name RSligsisiaiy Potential lnc A falc tsa) ABC Bakery Various products All types of High qualities Widespread distribution | customers Reasonable prices system Givral Bakery French culinary style All types of Various products Perennial brand customers Hoa Vy Bakery | Provide fresh cakes, High-end Suitable for demands of higher prices customers the modern consumer Hong An Bakery | Perennial brand in Hanoi | All types of customers Suppliers: Key ingredients of products are wheat, milk, butter, sugar, eggs, ... Raw materials also become a business concern. According to International Association for Cereal Science and Technology, World wheat production is likely to decline and push up wheat prices. Meanwhile, according to research by Phu Hung Securities Company, the cost of raw materials accounts for 55-60% of the cost of goods sold, while the cost of flour and sugar accounts for the largest proportion. Currently, most of the Vietnamese bakery businesses have to import flour, so the bakery business in this group is forecasted to be more difficult than before. The domestic material source can only partially meet the sugar demand, the rest of the enterprises still have to import sugar. International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY b) Customer research Target customer: The customers that Hera bakery wants to target mainly are individual customers, young people with high income, people who love partries. Partly, the enterprise specializing in events such as birthday parties, wedding Criteria for identifying target customers: 1) Individual customer: living and working in Thu Duc city and surrounding areas. this is the crowded populated areas Age: 18- under 18. Mostly are students, new employees, singles who are passionate with nice formality and delicious food. Over 25: people who are married and have stable income. they mainly consumed products for themselves, relatives or used as the gifts 2) Event businesses: although the number of individual customers segment is more dominant than the corporate customers segment, revenue from corporate customers remains higher than individual customers because they often order in large quantities Analyzing the competition in aspect of customer: Hera bakery’s customers are individual customers and event corporations. Therefore, there will be many high requirements about the quality and design of the product. So that Hera bakery needs to constantly update the trend of the market to avoid bored clients and best meet the demand of customers. In addition, the increasing consumer awareness of health issues related to common diseases such as obesity, diabetes, and high blood pressure is a major problem for Hera. Therefore, to meet the diverse demand of the target group of customers, it is necessary that Hera bakery should focus on healthy products such as vegetarian cakes, dieters, ... On the other hand, tourists from another locality or foreign visitors are also potential customers of Hera Bakery. There should be suitable products, bold characteristics of Hera bakery, city or Vietnam. 10 International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY 3. Organization a) Structure Orientation is a large company in the bakery business. Ownbakery owns a dense organization structure with 9 employees. To make sure that everything operates smoothly, company already has made an appropriate structure as shown below: 4 | anager ‘ T [ I I I 1 {| serior Baker § Salesman Cashier Security . Accountant: ¥ Manager: This position is responsible for planning, directing, and overseeing the operations and fiscal health of a business unit, division, department, or operating unit within an organization. The manager is responsible for overseeing and leading the work of a group of people in many instances. Cashier: A Cashier's primary role is to assist customers in the in-store check-out process. Main duties include ringing up sales, bagging items, requesting price checks, honoring coupons, collecting payment and giving appropriate change. Baker: Baker responsibilities include opening the bakery early in the morning, mixing dough, preparing fillings and glazing pastries. Baker and be able to decorate cakes using creative techniques. Salesman: Sales representatives are responsible for communicating the benefits of a company's products in order to drive sales. Senior Accountant: A senior accountant is a professional who provides financial info and incentives for mid-sized to large businesses. A highly qualified individual will help acquire new accounts for his employer, in addition to issuing financial analysis and reporting._ b) Capital Own Bakery is a single-share-holder limited company. It was established on May 12 2021 witha charter capital of 400 millions VND. And this has been divided specifically as follows: - 300 millions VND for equiment cost - 100 millions VND for construction cost 11 International University, Vietnam National University — HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY 15 |Soft paper cup 1 25000] 1 box 150pcs 16 |Mini bread baking tray 1 120000} 1 tray 6 cells 17 | 4slot bread baking tray 1 130000 18 |Stainless steel mousse 69000 ring mold 1 19 |Rye bread bag 2 25000 50000 1 bag 10pcs 20 |Rectangular cake base 5 8000 40000 1 bag 10pcs 21 |Rectangular plastic box 25 1700 42500 c. Material cost and production cost “* Material cost No Raw materials Aer Unit price Cle 1 |Wheat flour Kg 15000 2 |Corn starch Bag 25000 3 |Baking powder Bag 23000 1 bag 500g 4 |Tempura flour Bag 13000 1 bag 500g 5 |Dark rye flour Kg 109000 6 |Gelatin flour Pack 20000 1 pack 50g 7 |Gelatin leaf Pack 70000 1 pack 25 leaf 8 |Matcha flour Bag 420000 1 bag 500g 9 |Cream of tartar Bag 29000 1 bag 100g 14 International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY 10 {Butter Box 13000 1 box 200gr 11 |Unsalted butter Kg 90000 12 |Milk Carton 408000] 1 carton of 12 boxes 1L 13 |Sugar-free milk Liter 31500 14 |Condensed milk Box 27000 1 box 380g 15 |Sugar Kg 21000 16 |Brown sugar Bag 52000 1 bag 1kg 17. {Salt Bag 5800| 1 bag 500gr 18 | Vani Pack 65000 1 pack 100g 19 |Oil Bottle 32000 1 bottle 1L 20 |Vegetable oil Bottle 45000 1 bottle 2L 21 |Sesame oil Bottle 57000] 1 bottle 150mL 22 |Mozzarella cheese Pack 19000 1 pack 200g 23 |Whipping cream Box 70000 1 box 1L 24 |Cream cheese Lump 195000 1 lump 1Kg 25 |Grand marnier Bottle 27000] 1 bottle 100mL 26 |Passion fruit Bottle 47000) 1 bottle 700mL 27 |Dried sesame Pack 85000 1 pack 100g 28 |Lemon Bag 25000 1 pack 1kg 15 International University, Vietnam National University — HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY 29 |Sausage Bag 18000 1 carton has 150 30 |Egg Carton 315000 eggs 31 {Potatoes 3000 32 |Dry yeast Box 25000 Production cost REritews cay Dark Rye Bread Ingredients Unit Price Ingredients Unit Price Wheat flour 290gram 1000 | Wheat flour 700gram 2380 Butter 45gram 3000 | Dark rye flour 300gram 1875 Milk 90ml 1800 | Dry yeast 15gram 5100 Sugar 30gram 70 | Ice 650ml 200 Salt 5Sgram 50 | Salt 13gram 130 Total 5920 | Total 9685 Ingredients Unit Price Ingredients Unit Price Wheat flour 400gram 1360 | Wheat flour 140gram 476 16 International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY Dried sesame 1/4 tsp 500 Total 12200 | Total 3600 Le) Crocm timer 4 Cupcake Ingredients Unit Price Ingredients Unit Price Sausage 1 6000 | Egg 1 1000 Mozzarella cheese 20gram 500 | Corn starch 50gram 2500 Baking powder 10gram 34 | Wheat flour 50gram 170 Egg 1 1000 | Baking powder 2gram 500 Salt 10gram 100 | Oil 10ml 200 Sugar 50gram 100 | Milk 20ml 400 Sugar-free milk 100ml 2000 | Vani 5ml 2000 Potatoes ahalf 3000 | Cream of tartar Sgram 1200 Tempura flour 30gram 500 | Sugar 100gram 200 Stick 1 100 | Papercup 1 500 Total 13334 | Total 8670 19 International University, Vietnam National University — HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY Nite Ingredients Unit Price Wheat flour 420gram 1428 Eggs 3 3000 Sugar 90gram 180 Salt 2gram 40 Baking powder 25gram 6250 Vegetable oil 80ml 2800 Milk 240ml 4800 Total 18498 20 International University, Vietnam National University — HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY c) Pakaging and shipping Qua: ry Notes Food paper box 200 1.500 300.000 Kraft paper bag 200 300 60.000 Cupcake liner 200 400 88000 Cupcake box 50 10.000 500.000] 6 slots Parchment paper roll 10 16.000 160.000] 5 meters Handbag paper bag 300 2.500 750.000 Rye bread bag 40 5.000 200.000}10 bags/set Total 2.050.000 21 International University, Vietnam National University — HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY g) Salaries Ce Brstrciy Quantity RETA Zprryatiy rman g 1 Manager 1 15000000 15000000 2 Senior Accountant 1 9000000 9000000 3 Baker 3 7500000 22500000 4 Salesman 2 6000000 12000000 5 Cashier 1 6000000 6000000 6 Security 1 6000000 6000000 Total cost 70500000 h) Selling price uN Bier ta Price 1 Sandwich 15000 2 Cheese Hot Dog 19000 3 Cupcake 19000 4 Dark Rye Bread 29000 5 Pancake 59000 6 Croissant 42000 7 Sponge cake 35000 24 International University, Vietnam National University — HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY 8 Mousse Passion Cheese 29000 9 Mousse Matcha 29000 10 Sweet Bread 29000 11 Bread 18000 Average 29636,63636 2. Financial analysis a) Breakeven point @ Fixed cost per month Content 1 Salary and insurance 70500000 2 Operating system 12991200 3 Stationary 2650000 4 Pakaging and shipping 2050000 5 Repair and maintenance 2500000 Total 88306200 25 International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY SELLING PRICE AND VARIABLE COST In order to find values of product sell (p) per unit and variable cost (_ ), we calculate average values of selling price and material cost. P= 29 636, 64 Break-even point equation: p.D=C,+¢,D We have: p= 29,364 C, = 384,698,700 c, = 12876,73 Thus, 88306200 D= 29364,64 +12876,73 = 5355 units per month Hence, we need to sell 5335 units for each month to pay back that period. Payback period: Initial invesment__ 394900000 Payback = “7 mual cash inflow ~ 210871986 = 1,87 years Annual Cash Inflow: the average of profit in the first three years. However, the briefest perusal of the projected cash flows reveals that the flows are heavily weighted toward the far end of the time period, so the results of this calculation cannot be correct. Instead, the company's financial analyst runs the calculation year by year, deducting the cash flows in each successive year from the remaining investment. The results of this calculation are: b3) CC) Va Nee osie 0 -394,000,000 200,671,200 | -193,328,800 210,704,760 | 0 221,239,998 | 0 26 wly|e International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY 3. Forecasting 2054008800 2156709240 2264544702 Total revenue 2254680000 2367414000 2485784700 200671200 210704760 221239998 Siteel ety caciee ela -394900000 129507418.2 27% The cash flow with Internal rate of return IRR= 27% 232,301,997.9VND 221,239,998VND 200,671,200VND = 210,704,760VND Positive cashtlow vr) / ,_ Year! 7 x Year 2 Year 3 \ Year “ * Breakeven point “ cumnlative cash flow Initial investment (acgative cash flow) - Or / 394,900,000VND The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of a project zero. In other words, it is the expected compound annual rate of return that will be earned on a project or investment. A project with a higher IRR is generally more appealing. The IRR has the advantage of being consistent across different types of investments, making it an excellent method for ranking opportunities. Assuming that investment costs are comparable, the project with the higher IRR is more likely to be chosen. 29 International University, Vietnam National University -— HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY In our project, initial investment is 394,900000 and calculated an IRR is 27%. According to our prediction, we can achieve total revenue of 6,263,000 a day and a month the revenue will be 187,890,000. And in 1 year, our revenue is 2,254,680,000. Moreover, in year 1, the profit is 200,671,200. Year 2 is 210,704,760 and year 3 is 221,239,998. We can see that the profit is increasing every year. And we believe that in about 5 years the profit will increase to 400 million. In addition, our MARR is 10%. Comparison with IRR, we see that IRR is greater than MARR. so that, we decide to invest this project Generally, We really expect this investment. Although Actual return is seldom the same as estimated, the project with the IRR 27% like this is most likely to be successful. 4. Alternatives After considering any possible investments, we decided to compare our bakery’s business with the short-term investment fund which has the interest rate at 12% per year (5 years term). Our capital investment is considered 400,000,000 VND. FW =400,000,00« E i, =400,000,000 F 12%,5 P P On the other hand, the maturity bakery's annual profit of 5% for 5 years is 1,108,835,054 with i=8% per year. = 400,000,000* 1.7623 =702,920,000 FW =—394,900,000 * SiN +1,108,835,054* © i,N|=—394,900,000% F855 +1,108,835,054 +| 8 “* Comment Based on that calculation, it’s easy to see that investing in the fund is better than investing in a bakery. However, we should consider carefully that the bakery still has salvage value of the equipment. Moreover, in the long-term investment, the bakery business will give investors more profit than the investment fund. 30 International University, Vietnam National University — HCMC PROJECT OF THE COURSE: ENGINEERING ECONOMY IV. CONCLUSION Overall, Hera’s bakery is the business which targets all audiences (from teenagers to mature people). To achieve that purpose, we decided to put our store on Vo Van Ngan Street, Thu Duc city - a young, emerging city, located in the east of Saigon. Besides, Hera’s bakery has a variety of cakes to meet the variety of demand of the customers. With an initial investment of approximately 400,000,000 VND and carefully considered, we believe that our bakery is a good investment and has a development potential. Besides external factors such as environment, capital, revenue, etc,... another respect that also affects the success of Hera bakery is the human factor. The owner takes risks to startup the bakery with huge capital and it takes almost 2 years for the break event point. Long time of payback means longer challenges, the owner has to undergo the tests of patience, meticulousness and creativity. Humans play a crucial role in the startup factors as it could change the success in both positive and negative ways. 31