The Services Provided by Kangoo Travel Agency - Case Study Example

Business plan Table of Contents 1.0 Executive Summary 3 1.1 Business idea and goals 3 1.2 Marketing 3 1.3 Operations 4 1.4 Finance 4 2.0 Introduction/Background 4 2.1 Mission statement 4 2.2 Company background 5 2.3 Business goals 5 3.0 Marketing Analysis 5 3.1 Market Research 5 3.2 Market analysis 6 3.2.1 Industry Analysis 6 3.2.2 Seasonality 6 3.2.3 Competitors 6 3.2.4 Potential Strategic Alliances 7 3.2.5 SWOT Analysis 7 3.3 Market Plan 8 3.3.1 Products/Services and Target Market 8 3.3.2 Target market 8 3.3.3 Marketing Mix 8 3.4 Evaluation of marketing 11 4.0 operations 11 4.1 Legal and licensing requirements 11 4.2 Management details 12 4.3 Organizational structures and staffing 13 4.4 professional advisers 13 4.5 Insurance and security issues 13 4.6 Business premise 14 4.7 Equipment required 14 4.8 Production process 14 4.9 Critical risks/contingency plans 15 5.0 The financial plan 15 5.1 Financial strategy 15 5.2 Establishment costs and sources of funds 16 5.3 Balance sheet projections 16 5.4 Profit and loss projections 18 5.5 Expected cash flow projections 19 6.0 Conclusion 21 References 23 1.0 Executive Summary 1.1 Business idea and goals The main goal associated to establishing the Kangoo Travel Agency is to ensure that customer is familiar with agency main focus being travel. This business will largely specialize in traveling within the Australia states. The services that will be provided by Kangoo Travel Agency are; ticket booking, providing travel plan for various customers, both car and hotel rents as well as provision of a tour guide who is conversant with Australian culture and one who is able to understand various languages. The owner largely plans to commence by employing three individual that is; tour guide, front office assistant and a business developer to foresee the smooth running of the business. The business owner has a vision where he believes that in the next three to four years of the travel agency inception it will be able to employee over ten individuals. The business is expected to generate sales of around A$150,000 and a profit margin of A$3000 by the end of its first year trading. 1.2 Marketing Kangoo Travel Agency will have two main target markets namely; foreigners from various countries and locals who are from various states in Australia. The two groups will have different categories where foreigners will be expected to pay a higher price as compared to locals. It is approximated that there are many foreigners who visit Australia during holidays and festivities thus creating market demand for travel Agencies across Australia. Therefore, the company recognizes the need to promote the business through direct mailing, social networks, yellow pages and telephone canvassing (Dolnicar and Laesser 2007). 1.3 Operations The business will operate with three employees as a start up. It is important that minimal expenses and equipments envisaged at this initial stage. 1.4 Finance Initially the business will be self funding with the director providing initial capital of A$20000 with the expectation that the company will provide funds from its subsequent operations. Borrowing from financial institution will also be carried out at later stages (Dolnicar and Laesser 2007). 2.0 Introduction/Background 2.1 Mission statement Kangoo travel agency core line of activities targets individuals who are visiting Australia or citizens who wish to tour the country. The agency specializes in travel activities such as booking of tickets and hotels, car hire among other activities basically involving travel planning for customers. The objective of the company is to provide its clients with the most comfortable, sophisticated and unforgettable experience around the core Australian adventure destinations. The company intends to provide its clients with all travel solutions that will earn it a top rank among all other travel agencies in Australia. A core ambition of the company is to bring a new image in Australia travel industry by ensuring that travelers experience the true color of Australia by introducing them to its culture and major fascinating destinations that will make them long to come and visit again. This is not only intended to benefit the company but the country as well through revenues accrued from foreign tourists. The agency also intends to work in the best interest of its employees by providing them with a friendly pay and general job security. 2.2 Company background The company is a new venture founded by its chief executive, Fridah Edwards. Establishment of the company was inspired by previous consultation works of the CE that involved escorted tours, individual travel arrangements and custom group tours. Through this new venture, the management intends to cover a wider scope of travelling activities. 2.3 Business goals The company short term prospects are to employ as many employees as demand requires and to establish offices in major tourist destinations around the country. In the long run, the company intends to make over $500,000 in annual revenue, become the best travel agency in Australia and extend operations to foreign countries. 3.0 Marketing Analysis 3.1 Market Research The following resources were found to be important in generating market research which will be of importance to Kangoo Travel Agency; Australian post: direct mail campaigns Travel compensation fund, Australia www.tcf.org.au Tourism Western Australia tourism guide Various traveling and marketing strategies journals Australian federation of travel agents www.afta.com.au Tourism Victoria: what is whole selling travel agents www.tourism.vic.gov.au/marketing/what-is-wholesaling%3F 3.2 Market analysis After a comprehensive review of the traveling agency industry, the following substantial information was obtained. 3.2.1 Industry Analysis Across Australia there have been numerous growths in travel agencies especially in the provision of travel information, accommodation, tourist attraction and both private and business travelers’ packages. This therefore portrays definite demand for travel services. Although most of the travel business is widely generated by large corporations, small business like Kangroo Travel Agency is like to pick up in a faster rate. In the coming years it is speculated that niche opportunities to provide travel businesses best exists in small organization such as Kangoo Travel Agency. A recent study indicate that most bigger Travel Agencies focus on foreigners as opposed to locals therefore giving small travel agencies a strong target market defined by locals. 3.2.2 Seasonality It is estimated that the travel agency business increases during festivities such as Christmas and Easter holiday as well as during summer periods. 3.2.3 Competitors Kangoo Travel Agencies business competitors are mainly large agencies which includes; Harvey World Travel Zuji Travelcity Company The Australian yellow pages have a list of over one hundred travel agencies which are also key competitors to Kangoo Travel Agencies which is a company which is beginning. 3.2.4 Potential Strategic Alliances Kangoo Travel Agencies focuses on creating efforts on finding several numbers of strategic alliances which will mainly be derived from bigger organization and with whom strong long term relationships can be formed. Being a self funded organization it is important to form alliances with public funded agencies so as to build a strong capital base. 3.2.5 SWOT Analysis Strengths Have a large target market defined by Australian locals thus a possibility of increased sales Weaknesses The three person operation may not be effective in track records and preparation of quoted tenders Opportunities Growth in tourism thus an increased boost in agencies Good industrial placement to widely qualify if the sectors become more regulated Threat Increased competitors Sensitivity of travel agents especially in today economic downturn as well as terrorism threat 3.3 Market Plan 3.3.1 Products/Services and Target Market Kangoo Travel Agency will focus on individuals who want to travel across Australia. Services that will be provided by the travel agency are telephone services, online services as well as providing information to customer depending on their specified needs. 3.3.2 Target market The company seeks to target various customers who are in certain divided groups. Customers are those individual with an interest of traveling across Australia which can be in the form of business tour, family tour or a corporate tour. 3.3.3 Marketing Mix The marketing mix will be analyzed with main focus on the company 4Ps that is; price, product, place and promotion. 3.3.3.1 Place Place for this travel agency is mainly about getting the right products to customers. Some of important place decisions are; Specific market channel members Distribution channels Market coverage transportation To ensure that it is ahead of its competitors, Kangoo Travel Agency is involved in several distribution strategies such as selective distribution, franchising which can be adopted by the company marketers to largely compliment the other elements defined in its marketing mix, exclusive distribution as well as intensive distribution (Jonathan and Jesko 2005). 3.3.3.2 Promotion and advertising To begin trading, the business needs to engage in several advertising and promotional services. There are various promotional services that have been put together by the company to ensure that it is able to increase its sales. The various marketing communication that will be adapted by the company are; Public relation and publicity Sales promotions Personal selling Promotional strategies such as pull and push Jonathan and Jesko (2005) maintain that, advertising will largely cover communication ranging from internet, TV commercials, billboards and print media. For this organization public relation, communication will not be largely be paid for these includes; press releases, conferences, exhibitions and sponsorship deals. After its inception, the company plans to employee staff that will be responsible for making sales through word of mouth to various customers. These sales personnel will play a vital role in creating an image for the company as well as increasing sales. 3.3.3.3 Price Bahadur and Patrick (2007) maintain that, it is important for the organization to understand the value of the services and products they are going to offer. There is need for the travel agency to understand the various established price points for services and travel products within the area of company locality. When establishing prices it is important to understand if the price is sensitive to the desired customer and for this reason family tour, corporate tour and business tour will have variation for designed price values. Kangoo Travel Agency has placed reasonable prices for their customers therefore they are far much ahead of its designed competitors. Terms of payment will be cash whereby customers are required to make bookings four days prior the travel period. The set prices are charged towards the lower ends that are usually charged by other traveling agents (Bahadur and Patrick 2007). In setting the price, the company is aware of the customer perceived value for the various services. The company is considering three basic pricing strategies namely; market penetration pricing, neutral pricing and market penetration pricing. Further, the travel agencies have set it prices in relation to other elements within its defined marketing mix. 3.3.3.4 Products For Kangoo Travel Agency, products are the various services that are intended to be distributed by the company. There are various decisions that the company have put in place to ensure their services stand out from their competitors. According to Tourism Western Australia (2006), these decisions include; functionality, brand name, quality, safety, styling, warranty, packaging and support. Products are defined in their offers which includes; corporate, family and business tours. Kangoo Travel Agency have organized a training which will ensure that its marketers are able to largely expand their desired market mix through increasing certain services line depth or further increasing the number of services lines (Tourism Western Australia 2006). The company realizes that every service is a main subject to desired life cycle which includes a growth phase, maturity phase and lastly, an eventual period where decrease in sales is incorporated. 3.4 Evaluation of marketing The effectiveness of Kangoo Travel Agency marketing strategy will be assessed on a three month basis by way of widely analyzing sales data to see which travel services has more sales and why is this. For instance, if more sales in the company services are emerging from personal selling, then the company will ensure that more resources are located to this method of advertising so as to meet up their sales target. Through carrying out quarterly evaluation of marketing, the company will be able to build up an effective background therefore creating strong and long term relationship with their clients as well as the desired strategic alliances within the travel business. 4.0 operations 4.1 Legal and licensing requirements Kangoo travel agency is a private company listed under private travel agencies. It meets all the necessary licensing requirements as stated by the Department of Fair Trading. The major requirement is that the person starting it up be proper and fit to manage a travel agency. Another requirement is that individuals assigned to head departments hold certain qualifications in line with the activities of the departments. The company is registered under the name “Kangoo Travel Agency” and under the shareholding of the director’s states below: Fridah Edwards (54% shareholding) Daniel Melcoy (46% shareholding) 4.2 Management details The management of the company comprises of four major top management figures whose titles and key responsibilities are: Fridah Edwards Title: Chief Executive Officer Responsibilities: She formulates the general company policies together with other board members, ensures implementation of policies and plans, reviews departmental reports and progress and generally oversees the company operations. Daniel Melcoy Title: Administration Manager Roles: He heads the human resource, Accounts and the IT department. Cynthia Eddie Title: Operations manager Roles: Responsible for the general touring activities and ticketing. Michael Dane Title: Marketing manager Roles: Responsible for marketing activities such as product development, promotions and advertisements. 4.3 Organizational structures and staffing The company operates a divisional kind of organizational structure whereby employees are assigned to different departments based on the kind of product or service they handle, the target market and the geographical location (Mintzer 2007). For instance there are those involved with administrative jobs such as admitting clients, booking hotels and hiring cars for them while other are involved with field activities such as driving clients around various tourist destinations. The agency advertises vacant positions through the media and the internet and screens them through oral interviews. The employees who qualify for the posts go through an intensive in-training program before they are dismissed to their respective departments. Top management is designated the responsibility of making policies, recruiting and supervising. Besides this, the company has several subordinate staff including office messengers, cleaners and guards. 4.4 professional advisers Professional assistance is vital in any given company. The agency will outsource professionals and experts such as auditors, lawyers, market analysts and insurance brokers whenever need arises. This will be done using formal tendering processes. 4.5 Insurance and security issues Kingoo utilizes most of the features that ensure maximum security of clients and workers as well. This includes using safe travel routes, having security guards in camping sites among others. Although the company takes cover for eventualities that it is liable for, it encourages clients to take personal insurance covers for any eventualities they might encounter during trips. In addition, confidentiality of customer travel details will be highly upheld. Cabinets will be secured with strong locks and passwords allocated to websites containing client information (Dooley 2011). 4.6 Business premise The company’s headquarter will be based in Sydney but other subsidiary offices will be strategically situated in major Tourist Destination Towns away and near Sydney. Choice for Sydney as the headquarter is based on the fact that it is centrally placed in addition to being the first destination point for many international visitors. Tourist destinations regions are will provide target points. The company will employ a highly reliable and convenient communication strategy to enhance effective communication among the offices; preferably the internet. Licenses for the different offices will be obtained from the municipalities they are located. 4.7 Equipment required There are many equipment and facilities required for this new venture and they include: 1. Travel vehicles and vans 2. Computers, telephones and fax machines 3. Printers and scanners 4. Cabinets 5. Offices 6. Office furniture 7. Camping equipment 8. Internet 4.8 Production process The agency will have a strategic plan and action plan that will be reviewed at the end of each financial plan after being adequately assessed by qualified financial analysts and auditors. The performance of departments will be reviewed on regular basis by heads of departments to ensure smooth delivery of services. As part of its short term goals, the agency intends to employ a Total Quality Management system that will ensure quality in all its operations (Arlt 2010). An organizational structure detailing key responsibilities of all employees will be prepared and reviewed at the start of each year. 4.9 Critical risks/contingency plans Major risks facing the company include growing competition from rivals in the industry, changing trends in the entertainment sector, overworking of employees during peak seasons and liability issues. To deal with legal claims filed against the company by clients who face injury during trips, the company will employ a company lawyer responsible for such eventualities. In addition, an ‘accident’ will be categorically defined in the company’s contractual documents with clients to avoid misunderstandings and confusions. In order to remain competitive and gain market dominance, Kangoo will have an innovative team that will explore marketing options that will ensure maximum competitive advantage. During the peak seasons for instance public holidays, the company will employ additional employees on contractual basis to meet the demand (Mintzer 2007). 5.0 The financial plan 5.1 Financial strategy In order to commence the business Kangoo Travel Agency require adequate financial resources to invest in new fixed assets, which include furniture, vehicles, premises and office equipment. This will require a total of $2 million. Since the business is a new venture, it has no internal sources of funds hence it will utilize the external sources of finance. This will mainly be obtained from the owners and the creditors. The business has applied for a loan of $1,500,000 from a bank and intends to benefit for $500,000 from hire purchase of vehicles. The owners’ equity will come mainly from their life savings, which will be in cash and will amount to $390,000. 5.2 Establishment costs and sources of funds Item $ ESTABLISHMENT COSTS Accountant fees 2,000 Solicitor fees 1,000 Rent deposit 100,000 Insurance premium 300,000 Advertising and promotion 200,000 Registration and licensing 10,000 Other 30,000 EQUIPMENT PURCHASE Premises 200,000 Machinery 150,000 Furniture 140,000 Vehicles 400,000 Other 67,000 5.3 Balance sheet projections $ $ Current assets Account receivables 200,000 Stock (food & beverages) 400,000 Total current assets 600,000 Fixed assets Premises 200,000 Machinery 150,000 Furniture 140,000 Vehicles 300,000 Total fixed assets 890,000 Total assets 1,390,000 Current liabilities Account payables 100,000 Short term loan 400,000 Total current liabilities 500,000 Long term liabilities Long term loan 500,000 Total long term liabilities 500,000 Total liabilities 1,000,000 Owners’ Equity 390,000 Total liabilities and owners’ Equity 1,390,000 The above balance sheet is as at commencement date and indicates the financial position of Kangoo Travel Agency as forecasted in the first year of its operations. The current ratio of 1.2:1 shows that the business is in a position to pay the short term financial obligations from its current assets. Some of these financial obligations include loan servicing, rent payment, insurance premiums and other operating expenses. The debt ratio of 0.7194:1 indicates the ability of the business to pay all its debts in the long term. 5.4 Profit and loss projections $ Revenue 1,000,000 Cost of revenue 400,000 Gross profit 600,000 Other income 150,000 Total income 750,000 Expenses Accounting fees 2,000 Advertising and promotion 12,000 Bank charges 6,000 Bank interest 48,000 Depreciation 36,000 Insurance 96,000 Legal fees 6,000 Motor vehicle expenses 24,000 Rent 60,000 Repairs and maintenance 48,000 Wages and salaries 108,000 Other expenses 12,000 Total expenses 458,000 Net income 292,000 The main sources of revenue for the business are tour guiding, travel services and catering and accommodation services. The business depreciates its fixed assets using the straight line method of depreciation. Due to inadequate business premises, the business rents some of the premises hence the cost incurred on rent. The gross profit margin of 60% indicates the ability of the business to generate profits or returns from investment. The bank charges an interest on the borrowed amount at the rate of 7% per annum on the outstanding loan amount. The total asset turnover of 71.94% shows the extent at which the business uses its assets to produce revenue for the business. The business is heavily insured against motor vehicle accidents, third party liability and professional indemnity. The annual insurance payment total 96,000; however premiums are paid on a monthly basis. The business invests heavily on advertising and promotion in order to gain a competitive edge since there are several players in the industry. Furthermore, the business is a new set up hence it requires a lot of publicity in order to establish itself in the tourist industry and create reasonable market share. 5.5 Expected cash flow projections Month 1 2 3 4 5 6 7 8 9 10 11 12 Total Income Tour guiding 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 180,000 Travel services 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 312,000 Catering and accommodation services 37,000 37,000 37,000 37,000 37,000 37,000 37,000 37,000 37,000 37,000 37,000 37,000 444,000 Other income 6,000 5,000 5,000 6,000 5,000 5,000 5,000 6,000 5,000 5,000 5,000 6,000 64,000 Total income 84,000 83,000 83,000 84,000 83,000 83,000 83,000 84,000 83,000 83,000 83,000 84,000 1,000,000 Expenditure Accounting fees 180 160 160 180 160 160 160 180 160 160 160 180 2,000 Advertising and promotion 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Bank charges 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Bank interest 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000 Depreciation 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000 Insurance 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 96,000 Legal fees 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Motor vehicle expenses 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000 Rent 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000 Repairs and maintenance 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000 Wages and salaries 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 108,000 Other expenses 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Total expenses 38,180 38,160 38,160 38,180 38,160 38,160 38,160 38,180 38,160 38,160 38,160 38,180 458,000 Surplus (deficit) 45,820 44,840 44,840 45,820 44,840 44,840 44,840 45,820 44,840 44,840 44,840 45,820 292,000 Opening balance - 45,820 44,840 44,840 45,820 44,840 44,840 44,840 45,820 44,840 44,840 44,840 Cash position 45,820 90,660 89,680 90,660 90,660 89,680 89,680 90,660 90,660 89,680 89,680 90,660 1,038,180 It is assumed that the income and expenditures will be constant throughout the year. The main motor vehicle expenses are the fuel and other minor repairs and maintenance. Tour guides and drivers account for the larger portion of wages and salaries. The cash position of the business indicates the ability of the business to meet the day to day expenses of the business throughout the year. 6.0 Conclusion The Kangoo Agencies Travel is a new venture that has been established as result of the chief executive’s experience in traveling agencies. The company has come up with a management that will assist in its operations an also assist the chief executives.The main goal of establishing the travel agency to ensure that customer’s needs are met, that is, ticket booking, rental services that includes transport and hotels and touring. Plans have been made to ensure that the goals have been met. These include: employing more employees who will assist in the running of the agencies; tour guide, business developer and office assistant. Few employees are needed in order to limit the use of finance. This will assists the agencies to increase its profit margins. However, as a long time goal the company will increase the employees in order to meet the demand that will be felt as the company grows. Basically, the company will have departments that will help in the running of the company. The agency has also planned to target two markets, foreigners and local customers. Market research was done to establish the sensitive of the markets. The following was obtained from the market analysis done; most large Travel Agencies deal with foreigners, therefore, the agencies is likely to benefit from the local customers, business is at the highest peak during festive, and therefore, the agencies has laid strategy to ensure it maximize its gains during this seasons. The main targets are different group which include families and business groups. The market mix will focus on the company 4Ps, that is, product, promotion, price, and place. The effectiveness of the marketing strategy will have to be assessed after three years to analyze the sales data in order to come up with an excellent strategy. References Arlt, W. 2010. Annual report of chine outbound trourism development 2009/2010. Munich: profil-Verl. Bahadur, N and Patrick, W. 2007. Not Just Effective but Efficient: A New Blueprint for Marketing in an Era of Fragmented Media. New York: Booz Allen Hamilton Davenport, T and Jeanne, G. 2007. Competing on Analytics: The New Science of Winning. Boston: Harvard Business School Press Dolnicar, S and Laesser, C. 2007. Travel agency market strategy: insight from Switzerland, journal of travel research , November 2007 vol.46 no 2 133-146 Dooley, G. 2011. A new era for travel insurance. Retrieved on 16th January 2011 from http://www.travelagentcentral.com/trends-research/a-new-era-travel-insurance-29387. Jonathan, G and Jesko, P. 2005. “Boosting Returns on Marketing Investment,” McKinsey Quarterly, (2), 37 Mintzer, R. 2007. Start your own travel business and more: cruise, adventure travel, tours, and senior travel. Irvine: Entrepreneur press. Tourism Western Australia. 2006. Quickstart guide to tourism: a guide to tour wholesalers and inbound tour operators. Retrieved from: http;/www.tourism.gov.au/publications%20library/growing%your%20business/guide%20wholesaler%20and%20inbound%20operators.pdf Read More