Establishing New Business Venture - Term Paper Example

Operations Report on establishing new Business Venture Name Institution Course Date Operations Report on establishing new Business Venture 1.0 Introduction The moment an entrepreneur decides to engage in a new venture, there are numerous obstacles to be overcome. The first obstacle is gaining the client trust and that deals with marketing and creation of value to the customer. The next is the vigorous completion within the industry from existing players and the last being the general macro economic environment. However, establishing a new venture is an interesting, but challenging engagement that can be used to spur economic growth, employee people and offer new approach to doing business and thus, more opportunities for customers and service/ product differentiation. This paper presents a report describing how the author will establish a new venture in the field of hospitality which offers restaurant services and accommodation. In order to attain this dream, the report is divided into three sections. The first section gives a description of the specific industry that the firm will operate in. The second section describes the service and products that the new firm will offer the benefits to prospective client and how the firm will differentiate its services. The last section gives a detailed operations plan. 2.0 The Industry For a firm to come up with the proper operations plan, it is important to conduct analysis at macro level, industrial level and internal level. This gives the entrepreneur the justification for locating in that place and ample time of formulating strategic management plan for operation. The intended venture will be in the hospitality industry specifically occupying the niche of restaurant and accommodation services. The firm will target both local customers and international ones who are tourists. The intended name of the venture will be known as Desert Park hotel with the vision of redefining customer experience and luxury. The physical location of the hotel will be at Dubai in United Arab Emirates inside the desert bordering a coastline and offering services to clients who wish to enjoy privacy in a natural setting and expansive place. The restaurant will focus on offering unique marine habits, view of pristine beaches, world class cuisine, cosmopolitan boutiques and indulgent spas. 2.1 The Macro Level Since the formation of U. A. E in 1971, the country has been able to attract massive investment in real estate, engineering, tourism, sports, political clout, resort cities, transport, trade, and man made lakes among others. The main working concept for the country is the adoption of Resource Based Industries. The country exports more than 184 industrial products, and an increase in the value of industrial exports from Dh 11 million in1975 to Dh 539 million in 1980, Dh 4825 million in 1985, and to Dh 8070 million in 1990 (Shihab, nd, p. 249, 250, 251 and 255). Apart from the oil reserve, the other reasons for economic change are the ready availability of financial capital, a well-established infrastructure, a flexible labour and employment policy, the availability of cheap energy, industrial zones and various incentives in legislation, plus political and social stability (Shihab, nd, p. 254 and 255).The country has experienced development in resort cities and free port cities. Dubai and Abu Dhabi forms one of the city states that have done much towards modernisation (Hurreiz, 2002, p. 116). This kind of phenomenal growth and expansion offers readily available market for new ventures and luxury services since people have high disposable income. 2.2 The Sector Level According to Euromonitor (2011), the hotel sector in the country is experiencing phenomenal growth. This is compounded by heavy investment by large international hotels. The report notes that accommodation market has grown exponentially with hotel sector accounting for 85% of the growth. In 2005 chained hotels reached 300. The portfolio of the already existing firms ranges from star services to less expensive end of the market operators. This means that there is trust in this market. The phenomenally expanding sector is the luxurious that provide top quality customer services and this is what Desert Park Restaurant and Accommodation wish to venture into. Moreover, emiratesupdate (2009) indicates that tourism sector has not been equally left behind. Tourism is ranked as one of the greatest contributors to hotel industry. Dubai is recording high occupancy rates irrespective of the prevailing global economic conditions. In 2008, Dubai attracted around 7 million hotel guests and according to projection the city aims at attracting 15 million hotel guests by 2015. This is the potential market that has attracted Desert Park Hotel into this region. Uaeintaract (2012) indicate that in February 2012 there was 5% growth in the number of guests staying in hotel apartments. This shoes the potential in this market. 2.3 The Firm Level Desert park vision is to redefine customer experience and luxury in a desert setting that offers services to customers through safe, quality food, affordability and convenience. The strategies to be adopted by the firm are based on three major generic approaches to business-level strategy for strategic and competitive advantage. First, the firm will ensure cost leadership. This is aimed at ensuring their business operations are carried out at the lowest cost as possible while upholding high performance with regard to customer satisfaction as well as business profitability. Second, we will provide services and products that are different from what everyone else in the market is providing. This will ensure they gain competitive advantage due to the differentiation strategy in the provision of their products and services. Third, focus is a vital strategy in gaining competitive advantage in a business environment. The restaurant needs to focus on achieving their set target and provide sustainable returns to shareholders as set out in the vision (albany.edu, n.d). The following table presents a summary of supply and demand indicators for Dubai hotels in Q1 and Q2 2007: Table1-1 Dubai Hotels Supply and Demand Summary (Q1 & Q2 2007) Category 5-star 4-star Overall All Hotels Supply Indicators Operating Hotels 42 49 317 Total Available Rooms 12,377 7,384 32,032 Total Available Beds 18,745 10,731 52,086 Demand Indicators Room Occupancy Rate 87.4% 84.3% 83.6% Bed Occupancy Rate 89.2% 83.1% 80.9% ARR (AED) 1,224 554 718 ARR (USD) 335 152 197 RevPAR(AED) 1,070 467 600 RevPAR (USD) 293 128 164 Source: DTCM statistics, 2006 2.0 The products and services The venture will engage provision of luxury services that are fairly priced (For the purpose of this report, luxury hotels are defined as five star properties as classified by DTCM). Desert Park hotel will offer services to clients who wish to enjoy privacy in a natural setting and expansive place. The restaurant will focus on offering unique marine habits, view of pristine beaches, world class cuisine, cosmopolitan boutiques and indulgent spas. 3.0 Operations Plan 3.1 Operation Objectives 3.1.1 Customer experience excellence and Operation Efficiency To be competitive, business organizations must ensure that their relationship with their customers is valued and effectively managed. The firm will command a high level of customer relationship management. Desert Park Hotel recognizes that customer experience is the cornerstone of their business and thus, seeks to ensure excellence in customer experience through effective customer relationship management. Operational efficiency is another important strategic approach to competition that will be adopted. The firm will seek to further its business productivity and performance as well as to achieve simplicity in its operations. To attain this, the firm will engage in lean production whereby products like food staff are made available when they are needed thus, ensuring delivery of fresh stuffs. Lean production has a marketing perspective as production is linked to the idea of value creation for the end customer who is willing to consume the product or service that offers the most value (Jackson & Jones, 1996, p. 12). The second action plan would be to engage in continual improvement/ total quality management so that we give new meaning to our services everyday. 3.1.2 Countering Industry Competition In order to sustain long term profitability, business organizations must strategically respond to competition. According to Porter (2008, p.1), there are five main competitive forces that influence strategy in a competitive business environment. The application of Porter’s framework by Desert Park Restaurant will enable the organization to understand the structure of the hospitality industry and stake out a strategic position that is more profitable to the firm and less vulnerable to competition from other industry players (Porter, 2008, p.2). These competitive forces popularly referred to as Porter’s framework include; supply-side economies of scale, demand-side benefits of scale, customer switching cost, capital requirements and incumbency advantage independent of size. Figure 1 below represents the five forces that shape industry competition. Figure 1: forces that shape industry competition. Source: (Porter, 2008, p.4). Desert Park having the urge of being a major player in the hospitality industry will apply Porter’s strategy by using tactics that are aimed at giving the airline competitive advantage and reshape the forces that determine industry competition in their favour (Porter, 2008, p.4). The firm will neutralize suppliers power by standardizing specifications to enable the firm easily switch among its suppliers without losing them. The firm will counter customer power by providing efficient and highly differentiated services that enable the restaurant acquire more customers and prevent customers from leaving them. The firm through its affordability policy will seek to be the low fee restaurant thus, tampering with what competitors in the industry are offering in terms of price wars. The firm having the urge to being a giant player will continue to scare off new entrants into the industry by heavily investing in highly differentiated products. Lastly the firm will apply porter’s framework by limiting threats posed by substitute or rather competitor by offering a wide range of products and services as a one stop shop. 3.1.3 Service Marketing Marketing offers an avenue for the hotel industry to achieve the desired market positioning by creating value to end customer (Rowles, 2000, p. 14). Understanding of consumer decision making rules empowers the marketer to formulate strategic decisions which can be utilized to effectively target segments with different goals. This can only be achieved through marketing by using multiple criteria and analysis of decision rules such as corporate expense accounts or consumers in once in a life time vacation attaching less importance to low rates. These calls for definition of target market by exploring what attributes targeted consumers feel are most salient to their decisions (O’ Fallon and Rutherford, 2010, p.333). Hospitality industry is characterised intangibility, inseparability, variability and perishability. While the above is true, Zeitharnl and Bitner (2003 cited in Wood and Brotherton, 2008, p. 305) observes that the food we receive in a restaurant is tangible, the atmosphere in the restaurant and the employees’ uniform help tangibilize the experience. In this sector, customer-contact employees’ are part of the product and both provider and customer must be present for the transaction to occur. For instance, the food in a restaurant may be outstanding but if the attendant has a poor attitude or offers inattentive service, clients will rate the total experience poorly. Inseparability also implies the customer is part of the product. These are what the new hotel will be out to achieve. 3.2 Location and Premise Acquisition As indicated earlier, the restaurant will be located in Dubai UAE precisely on the outskirts of the city bordering sea shoreline. The justification for the location is based on the phenomenal growth being experienced in this region and the economic policy adopted. Apart from these, Dubai city forms one of the tourist hubs with millions and millions of visitors (See statistic on page 5 and 6 on the industry analysis). The firm will build its own premise while the land will be leased from the government. The reason for building is that it would be cheaper in the long run and it can allow the firm to do various modifications as they like. MEED (Middle East Economic Digest) estimate an average room cost of 1.5 million per room at May 2008. The project is estimated to cost 170 million USD for a restaurant with 156 room capacity. The construction cost per room will be 1.08 million USD. 3.3 Service Process and Layout In service delivery concept, service blue prints form a significant part in the realization of the dream of customer satisfaction as it helps in identification of principal areas in the service process where keenness must be applied (Davis and Heineke, 2009, p.7). The process will start from the moment the client enters the hotel premises. He will proceed to waiting area and her/his name recorded. He will then proceed to the room to freshen up. After that the client returns to the dining room for food. In the subsequent steps, the services provided will depend with the kind of suite booked. Adopted from Davis and Heineke, 2009, p.8 3.4 Facilities, Materials and Maintenance Arabian Deluxe Room Area – 55 square meters (592 square foot) Special features – Private balconies with views of the Resort, a choice of twin or double king size beds, private dressing area, luxurious bathrooms with a large bath and walk in rain shower, antique furnishings and lounge seating area. Occupancy – maximum 2 adults and 2 children below the age of 12, or 3 adults. Below the age of 12, 2 children are free of charge with existing bedding. Children 12 years old and above are considered as adults and will be subject to a supplement) Transport – Private transfers to and from Dubai International Airport are available at a charge. 24 hours notice is required. Ocean Deluxe Room: Area -55 square meters (592 square foot) Special Features – Private balconies with sea-facing aspects, choice of twin or double king size beds, private dressing area, luxurious bathrooms with a large bath and walk-in rain shower, antique furnishings and lounge seating area Occupancy – maximum 2 adults and 2 children below the age of 12, or 3 adults. Below the age of 12, 2 children are free of charge with existing bedding. Children 12 years old and above are considered as adults and will be subject to a supplement) Transport – Private transfers to and from Dubai International Airport are available at a charge. 24 hours notice is required. Club Executive Area – 55 square meters (892 square foot) Special Features – Private balconies with excellent views, king size beds, private dressing area, luxurious bathroom with large bath and walk-in rain shower, antique furnishings and lounge seating area. The materials to be used will be guided with architectural and engineering specifications in relation to the cost, environment and overall integration. The chief guiding principle would be functionality and aesthetics. The facility maintenance to follow laid guidelines in the building codes, hospitality guidelines, safety engineering concepts, fire safety regulations and green energy concepts. 3.5 Legal framework Any building brought up in Dubai has to comply with numerous physical planning regulations. Moreover they have to comply with building standards, environmental factors and sustainability. Apart from the guidelines that regulation erection of structures, there is the licensing body for hotels called Abu Dhabi Tourism Authority. As a result of high demand, the issuance of licence is selective and rigorous process. The process entails briefing of prospective investors who are initially invited to attend an investment awareness session in which all the salient facts of the investment scenario are explained in full before they are allowed to proceed with their licence application (uaeinteract, 2012). 3.6 Human resource requirements Human resource forms an integral part in the organization. Human resource plays the critical role of implementing the ideas of the company and incubation of new ideas. Thus, the success of organization lies in how well they manage their human resource in terms of recruitment, attachment, retaining, training, remunerations and industrial relation approaches (Christensen and Ulrich, 2005, p. 36). The organization will appoint a competent human resource manager who with the top level management will review and recommend the best possible staffing level. 4.0 Conclusion With the kind of opportunity presented in this country under hospitality sector, this venture is a profitable engagement. The country has both local demand and international demand. This is buoyed by the high level of income from the locals and high visiting people. Moreover, the effort that the investor will place to ensure the development of the project is a sure indication that it will be a success. Lastly, the legal framework that has been provided for in this sector would go in as a support success factor. References Christensen, R., & Ulrich, D. (2005). Roadmap to Strategic HR: Turning a Great Idea into a Business Reality. New York: Amacom. Davis, M. & Heineke, J. (2009). Service innovation II: designing the service delivery process. Retrieved on 8th April 2012 from: http://www.summersoc.eu/wp- content/uploads/2011/01/Service-Innovation-II-Designing-Service-Processes-september- 27-2009.pdf. Department of Tourism & Commerce Marketing – DTCM. Various reports and press releases, 2006 – 2007 Emirates update. (2009). Dubai hospitality is flourishing. Retrieved on 8 April 2012 from: http://emiratesupdate.wordpress.com/2009/03/19/dubai-hospitality-industry-is- flourishing/ Euromonitor international. (2011). Booming hotel industry in the UAE. Retrieved on 8 April 2012 from: http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=10 45 Hurreiz, S. H. A. (2002). Folklore and Folklife in the United Arab Emirates. London: Routledge Jackson, T. L. & Jones, K. R. (1996). Implementing lean management systems. Oregon Portland: productivity inc. O’Fallon, M. J. & Rutherford, D. G. (2010). Hotel management and operations. New Jersey: John Wiley and sons. Porter, M. E. (2008). The five Competitive Forces that Shape Strategy. Harvard Business Review. Website, 8th April, 2012 from: www.hbrreprints.org. Rowles, K. (2000). Processed apple product marketing analysis: hard cider and apple wine. New York State College of Agriculture and Life Sciences, Cornell University, Ithaca, New York Shihab, M. (nd). Economic development in the UAE. Retrieved on 8th April 2012 from: http://www.uaeinteract.com/uaeint_misc/pdf/perspectives/12.pdf. UAE Interact. (2012). The economy hotels. Retrieved on 8 April 2012 from: http://www.uaeinteract.com/news/default.asp?ID=246. Wood, R. C. & Brotherton, B. (2008). The sage handbook of hospitality management. London: Sage publication limited. www.albany.edu, Business-Level Strategy. albany.edu, n.d. Website, 8th April, 2012 from: http://www.albany.edu/faculty/ja0754/bmgt481/lecture4.html Read More