shikhar bm ia

8/3/2019 Shikhar BM IA

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Business Management

Internal Assessment

Should Ambrosia shift from being a B2B to a

B2C operator for greater profitability?

Candidate name: Shikhar Swarup

Candidate Session Number: 002760-029


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Business and Management Internal Assessment

Research Proposal

Research Question

Should Ambrosia shift from being a B2B to a B2C operator for greater

profitability?

Theoretical Framework

Rationale for Study

Ambrosia is a sole proprietorship of Mrs. Isha Swarup. It is in the catering

business and the market for catering firms has been expanding as the trend

to outsource catering in Jaipur has increased. Ambrosia operates as a

supplier of exclusive foods for Sweet Caterers, a large and well recognized

caterer in the city. With a rising market for exclusive cateringand a great

potential, Ambrosia wants to grasp the opportunity and make higher profitsby operating independently on a larger scale. This would even garner more

recognition for the firm which is essential to survive in the service sector.

This endeavor to cater independently seems very attractive. However,

business tools need to be used to analyze the viability of the proposed

market change for Ambrosia.

Areas of Syllabus Covered

y

3.2y 3.3

y 3.5

y 4.2


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This study is a financial analysis of the viability of Ambrosia undertaking the

desired market development. The following tools and concepts have been

used to carry out this study:

Break-even Analysis

Porters Five Force AnalysisPayback Period

Cash flow Forecast

Due to various non-financial factors influencing the owners decision,

qualitative aspects have been taken into account as well.

Research Methodology

Sources of Information

Mainly Primary Research was used for the purpose of this study. This

included:

Primary Research:

y Interview with the owner: An interview will be conducted with Mrs. Isha

Swarup, the owner of Ambrosia.

y Competition Analysis: A Consumer Panel approach shall be used

wherein a panel of 4 will attend events catered by the potential

competitors of Ambrosia as a B2C operator.

Secondary Research:

Menu Comparison: Brochures of competitors were used to find out the

number no. of items served in a standard menu of each firm and to find

out the prices of these menus.


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Anticipated Difficulties Possible Solutions

Owners hesitation to reveal truebusiness figures.

Comfort the owner by reaffirmingthat this study is for schoolpurposes.

Biased questionnaire results.

Structure the questionnaire in a

manner that evokes least bias inanswers.

Subjectivity of the survey involvingtaste and preference.

Misleading sample for survey.Though a kids event, parents orelders that form the market shouldonly be surveyed.

Qualitative factors dominatingowners decision while the study is

more quantitative.

Consider key qualitative factors inthe study as well.

Action Plan

Date Activity


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Introduction

The catering business has a lot of potential as in the Jaipur market and

people tend to outsource catering for parties. They prefer to let professionalshandle the food instead of hiring part time cooks as that makes the family

members embroiled in serving the food.

In 2006, Mrs. Isha Swarup started a catering business named Ambrosia,

meaning food for the Gods. Her aptitude for cooking and constant

appreciation by friends and family prompted her to capitalize on her talent

and occupy herself as well. Ambrosia tied up with a large, well established

and trusted catering firm Sweet Caterers. Sweet Caterers outsources parts

of their large orders from Ambrosia. Initially, they outsourced only vegetarian

food. Later they started accepting non-vegetarian orders as well and would

give that entire section to Ambrosia.

Being a business-to-business (B2B) service provider, Ambrosia has little

recognition in the market and almost negligible branding. While at the outset

Mrs. Swarup had started the business more as a hobby than for profits, she

is now wanting to shift her focus to more profits and turn Ambrosia into a

professionally run business, which caters to the end users rather than act as

a backend operator. This means that Ambrosia would have to switch from a

B2B form of business to a B2C form wherein it would provide the entire

menu as well as catering services of an order taken directly from the

consumer.

Given that the market opportunity exists and the owner of ambrosia is

looking at changing her market, the research was conducted to investigate

whether this alternative is better than the prevailing form of business used by

Ambrosia. Hence the research question is

Should Ambrosia shift from being a B2B to a B2C operator for greater

profitability?


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Research Methodology

Sources of Information

Primary Research:

y Interview with the owner: An interview was conducted with Mrs. Isha

Swarup, the owner of Ambrosia. The interview form gave a deep

insight into the firm and its working. Moreover, queries and confusions

were resolved on the spot. However, an interview is a long and time-

consuming for the interviewee requires patience.

y Competition Analysis: A Consumer Panel comprising of 4 panelists

was appointed that attended events catered by the potential

competitors of Ambrosia as a B2C operator. This form of market

research gave a qualitative touch to this study and in the meanwhile,

saved time as the panelists conducted the main field work. However

there is no certainty that this panel is representative of the entire

market of Ambrosia.

Secondary Research:

y Menu Comparison: Brochures of competitors were used to find out the

number no. of items served in a standard menu of each firm and to find

out the prices of these menus. This helped gain an understanding of

the competitors that would act as a the main threat to Ambrosia.

Though the number of dishes served and price offered do not solely

determine the threat of a competitor, Ambrosia could prepare itself by

pricing accordingly.

Tools

y Break Even Analysis: Turning into a B2C form would increase fixed

cost significantly. A break-even analysis was thus carried out to take

out the minimum number of plates to be sold in order to cover fixed

costs and start making profits. However, one was required to make

assumptions including the number of people in every party.


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y Income Statements: Income statements were created for the current

business and the proposed option for the next 3 years to compare

revenues and profits.

y

Cashflow forecast: A Cashflow forecast was made for the Ambrosia if itwere to run as a B2C firm in order to investigate any liquidity-related

issues the firm may face.

y Porters Five Forces: As Ambrosia will be a new entrant into the market

where it caters directly to the customers, it might face certain

difficulties. A Porters Five Force Analysis was done for Ambrosia

entering the consumer food catering market.


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Findings Analysis and Discussion

Financial analysis has been conducted to check the viability of the project. A

range of tools were used.

Break-even Analysis1

Ambrosia currently has extremely low fixed costs as it gets occasional orders

for which factors like labour, equipment, transport etc. are hired on the day of

the order and tend to contribute to the variable cost. However, to operate as

a full-fledged catering firm, Ambrosia would see a steep rise in the fixed

costs.

Monthly fixed costs sum up to Rs. 1,07,201.2

This includes an EMI for initial investment of 20,000 as well as an interest

repayment of Rs.12,455 to account for an opportunity cost of having

invested the investment amount in a bank.

The average costs were calculated on a per-plate basis. The Average

Variable Cost of a plate came out to be Rs. 2203

in a fully catered menu4

and

the selling price was kept at Rs. 400.

Therefore,

Break-Even Point =

=

= 595.6 596

Hence, Ambrosia needs to sell a minimum of 596 plates each month to cover

its fixed costs and start making a profit.

1Figures based on interview with Owner and other Appendices.

2Appendix 3: Monthly Fixed Costs

3Interview of the owner

4Includes Snacks, Main Course (Veg. & Non-Veg.), Desserts, Beverages and Service


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The firm is presumed to cater an order of 500 people per party and taking the

current average of 2 parties per month.

This means that Ambrosia will be able to easily make a profit each month as

the monthly fixed costs get covered in just over one party. Even with a

conservative estimate of 2 parties a month, Ambrosia makes a profit of Rs.72,700

5.

As seen in Appendix 5, Ambrosia has currently been making an average

profit of Rs. 60,000 per month as a backend operator. With an increase in

profits of more than Rs. 12,000 the decision to expand seems better as the

profitability will increase by 20%.

Payback period

Initial Investment 12,45,500

Monthly Contribution 20,000

Yearly Contribution 2,40,000

Payback Period =

=

= 5.19 years

The initial investment will be covered in less than 5 years and 3 months, after

which the profits will increase, making it even more viable.

Cashflow Forecast

Appendix 4 shows the Cashflow Forecast conducted for Ambrosia as anindependent operator.

While there is a negative Net Cashflow as well as a negative Closing Balance

in the first two months of operation, the Cashflow of the firm gradually

5Appendix 6: Income Statements for Ambrosia as a B2C operator.


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improves. Infact, by the end of one year the firm has a net Cashflow of more

than Rs. 10,00,000.

Comparative Analysis: Income Statements

On the basis of costs approximated with the help of Mrs. Isha Swarup, Annual

Income Statements were made for the current business as well as for the

proposed expansion upto the year 2012.6

Average Growth Rate7

Current Proposed Option

Sales Revenue 10.50% 12.00%

Cost of Sales 8.00% 10.00%

Gross Profit 13.75% 14.40%

Fixed Expenses 10.00% 10.00%

Operating Profit 17.39% 20.58%

Profit After Tax 17.39% 20.58%

The PAT growth rate of 20.58% in the proposed option (B2C) is higher than

the growth rate of the current business which is at 17.39%. Moreover, this

20.58% is a percentage of a much bigger sales revenue. This shows that the

proposed option is financially better according to the amount of profit as well

as in terms of the rate at which it will increase.

The higher profitability is also on account of decreased Cost of Sales Growth

Rate due to the economies of scale which the firm will have in its proposedventure as a B2C operator.

6Appendices 5 and 6: Income Statements for Ambrosia

7Calculated from Appendix 7: Growth Rates


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Projected Figures of Both B2B and B2C

Year 2 0 1 0 2 0 1 1 2 0 1 2

B2B B2C B2B B2C B2B B2C

Sales Revenue Rs. 20,51,280 Rs. 48,00,000 Rs. 22,56,408 Rs. 53,76,000 Rs. 24,82,049 Rs. 60,21,12

Gross Profit Rs. 9,31,536 Rs. 24,72,000 Rs. 1,28,091 Rs. 24,72,000 Rs. 17,613 Rs. 28,26,72

Operating Profit Rs. 4,95,936 Rs. 10,56,953 Rs. 86,239 Rs. 10,56,953 Rs. 14,996 Rs. 12,70,16

Profit After Tax

(PAT)Rs. 3,47,155 Rs. 6,11,516 Rs. 4,07,523 Rs. 7,39,867 Rs. 4,78,388 Rs. 8,89,11

After 5 years of operations, the current form of business is expected to earn a

PAT of Rs. 2.5 lakh8. Whereas in the first year of operating as a B2C

Ambrosia can earn more than Rs. 6.1 lakh as PAT keeping in mind that a

certain amount has been allocated for the repayment of the initial investment.

The sales revenue from a B2C form of operation is more than double than

that earned from the current form of business. Hence, the proposed B2C form

seems to be financially more viable than the current business.

However, qualitative factors also need to be considered before arriving atsuch a business decision.

8Rs. 1 Lakh = Rs. 100,000


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Non-Financial Analysis

Competitor Analysis

The results of the research carried out using a Consumer Panel from

Appendix 9 have been plotted in the figure below.

Ambrosias strength seems to be its non-vegetarian main course dishes.

However, Ambrosia needs to improve the snacks it serves or provide new

better snacks as it has got a very low ranking for its snacks as compared tothe other firms. The feedback for Ambrosias desserts was also average,

while REDS and J. Oberoi got better ranking. REDS seems to be the main

competition to Ambrosia in terms of the quality and service provided. But at

0 1 2 3 4 5

Snacks

Main Course - Veg

Main Course - Non-Veg.

Dessert

Variety

Presentation

Service

Ambrosia

J. Oberoi

Gyanji

REDS

Sweet Caterers


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the same time, REDS has a price range of Rs. 500-5509 as compared to

Ambrosias range of Rs. 400-450 which would work in favor of Ambrosia.

Keeping the price in mind, Sweet Caterers appears to be the main potential

competitor of Ambrosia. Ambrosia currently supplies the non-vegetarian

section to Sweet Caterers and got a high ranking. Thus, absence of Ambrosiato Sweet Caterers will affect them in the short run. While this may be

beneficial to Ambrosia initially, it may develop a sense of betrayal within

Sweet Caterers causing them to resort to competition based pricing strategies

like predatory pricing to prevent Ambrosia from establishing itself in the

market. As a result of this, the expected orders may not materialize leading to

inaccuracy in the sales forecast.

Timings

Though most of the food is prepared earlier in the day, the personal touch of

the owner is required to ensure proper display and serving of the food or

handle the situation in case of a crisis. Conventionally, the owner handles this

because of his knowledge and experience. Presently, Mrs. Swarup doesnt

need to stay on the site as the owner of Sweet Caterers is there to handle

such tasks. In the interview, Mrs. Swarup mentions this as a major setback as

she is not comfortable being at party sites that to run upto late hours.

Man-management

Another factor that can act as a setback for Ambrosia as a B2C operator is

Mrs. Swarups lack of experience in labor management. Language also acts

as a barrier as the labour converses in local dialect which Mrs. Swarup is not

familiar with. Managing human resources is essential to run a business

successfully and could cause managerial problems for Ambrosia.

Moreover, the labour hired for such parties is not well trained or experienced

and could hamper the image of Ambrosia as a high-end catering firm.

A possible solution for these problems could be to hire a manger who would

be able to stay on-site instead of Mrs. Swarup as well as be able to manage

the labour present there. Though it may take a manager significant time to

9Appendix


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reach the level of knowledge and experience of Mrs. Swarup, it seems the

like the only practical solution to overcome the restraining problems


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Conclusion

After using various financial tools, it can be said that shifting from a

Business-to-Business to a Business-to-Consumer firm makes financial sensefor Ambrosia because of the higher Profit After Tax as well as the higher

average growth rate of the profits. Not only does sales revenue more than

double, but the average costs decrease due to economies of scale that

cannot be attained as a small backend operator. Out of her savings, the

owner would be required to invest a sum of Rs. 12,45,500 which gets

recovered in less than 5.2 years which seems practical. Moreover, in the

very first year of operating as B2C firm Ambrosia is expected to generate a

PAT of Rs. 6,11,516 which is almost Rs. 3.6 lakh or 142% more than the

projected profit as a B2B does in the same year.

While there is moderate competition in such a market, brand loyalty can act

as a hindrance. However, market research shows the high quality and taste

of Ambrosias main course dishes which can give it an edge, considering

that its prices are lower than those with the same ranking. Yet, Ambrosia

would have to improve on sections including snacks and desserts in order to

counter the competition. Moreover, problems like that of late timings and lack

of experience in labour-management would arise but can be tackled by

hiring a manager.

Hence my conclusion is that, with a little more effort, Ambrosia can enter the

consumer market for catering and earn higher profits, whilst recovering its

capital costs within a suitable time period making it a financially viable

decision.


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Limitations

y Owner may try to present a better picture of her own firm.

y It is difficult to compare the current form of business with the proposed

plan due to a different scale of production, different client, etc.

y Consumer panel may not be representative of the entire potential

market for Ambrosias proposed plan.

y The Cashflow forecast and other statements constructed are mere

speculations made with certain assumptions. These may vary due to

external factors influencing costs and other figures.


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Appendix 1: Relevant excerpts from Interview with the Owner

Q. When and why did you start your catering firm, Ambrosia?

A. I started Ambrosia in the beginning of 2006. I had always had a keen

interest in cooking and would get a lot of compliments and appreciation forthe food I made for the parties I hosted. With this as a motivation and the

need to occupy myself during the day, I wanted to make a business activity

out of my skill. My friends Rishabh Jain and his wife Urvashi encouraged me

to do so to. Once I told them about my serious decision to do catering as a

profession, they came to me with the business proposal which is now in

action.

Q. Why did you not take up the conventional way of operating as a B2C

operator? What are the problems you would face if you were to operate

as a B2C?

A. Initially I did give it a thought but when I got to know about the practical

realities, I opted not to go in for full-fledged catering. It requires too much time

and effort to run such a business and is a full-time job. I have a house to

manage and two kids to take care of. I need to devote significant time to them

as well. Moreover, 99% of catering orders, atleast in my market, are for

parties during the night. There needs to be a person to take care of

everything, manage the food on the spot, handle the situation in case of a

crisis etc. But I do not feel at ease being at the site till late, that also with the

predominantly male staff. Handling the staff itself is a difficult process. Since,

most of them are hired temporarily for orders, there isnt a bond of trust of

familiarity. Things like theft of cutlery/crockery become a common thing.

When I used to see Rishabh (Owner of Sweet Caterers) handling his staff, I

would doubt if Id be able to deal with a labour force the same way. So

basically, that form of business was for someone who was completely

devoted to it and had some experience in the field. I on the other hand had

just wanted to occupy myself occasionally and derive a sense of worth out of

this activity and thanks to Rishabh and Urvashi it was made possible.

The problems I would face to operate as a B2C still include the reasons I

stated before of late-hours of work and the labour. Another challenge that

Ambrosia would face is of recognition in the market. For a new entrant in the

market like Amborisia it would be tough to establish its name because the

mina form of promotion in this business is through word of mouth. Also, in the

current situation I have the safety that if something goes wrong, be it in taste


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or quantity, Sweet Caterers would bear the costs of it in terms of the image of

the company. Thus I have this safety which I lose as an independent caterer

and a bad word of mouth through even few people of the party could tarnish

Ambrosias image and make it tough to establish it in the consumer market

for catering.Q. Have your objectives changed overtime?

A. To quite an extent they have. Now I have gained a lot of experience in the

field after more than 3 years of running. Moreover, my sons are completing

their education and are to go abroad for their studies. Thus my focus is

gradually shifting from home to work. Though I set out to run this business as

a hobby and to occupy myself, it has become more than that over time. I have

become more serious about it and treat it as a business activity. But there is

not a very high scope of growth in the kind of business model I have used.And when it comes to catering directly to customers, I used to turn down the

option because of all the problems that caused me not to opt for them in the

first place. Moreover, I did not really know whether doing so would make

sense. As in whether the extra effort put in would be worth in terms of the

returns.

Q. What do you think the costs associated with such a decision of

catering to the consumers directly?

(The following costs were calculated with the help of the owner and have

been expanded in the Appendices that follow)

Current B2B format:

Average Variable Cost: Rs. per plate

Selling Price: Rs. 140 per plate

Proposed B2C format:

Total Startup-Investment Cost: Rs. 12,45,500

Average Variable Cost: Rs. 220 per plate

Selling Price: Rs. 400 per plate


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Q. Whom do you think will act as competitors to Ambrosia as a B2C

operator?

A. Ambrosia would be a relatively high end catering firm in the market as our

prices are high and Sweet Caterers, to whom we currently supply, are also

catering our food to a high end consumer. So once we enter the consumermarket, our main competitors would obviously include Sweet Caterers. It

would also comprise of REDS, a restaurant that also does catering for

parties, Gyanji Caterers and J. Oberoi. There are other catering firms, but in

the price range of Rs. 400-600 per plate, these are the main competitors.

Five-star Hotels too provide competition in such a market but cannot be

clubbed together with catering firms as they offer more than just catering as

they provide an exclusive venue as well.


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Appendix 2: Startup Cost

Item Cost per Unit Quantity Total

Utensils Rs. 1,00,000

More Gas Burners 15000 10 Rs. 1,50,000

Crockery 200 600 Rs. 1,20,000

Cutlery 60 1000 Rs. 60,000

Serving-Chaffing Dishes Rs. 1,50,000

Linen Rs. 50,000

Serving Trays 100 50 Rs. 5,000

Kitchen Tables 1000 25 Rs. 25,000

Serving Tables 1000 25 Rs. 25,000

Round Tables 2000 20 Rs. 40,000

Ovens 14000 2 Rs. 28,000

Grills 10000 2 Rs. 20,000

Glasses 100 2000 Rs. 2,00,000

Uniforms 500 100 Rs. 50,000

Transportation Crates 500 25 Rs. 12,500

Washing/ Cleaning Equipment 500 20 Rs. 10,000

Transport Vehicle Rs. 2,00,000

Total Startup Cost Rs. 12,45,500

Appendix 3: Monthly Fixed Cost

Monthly Fixed Costs

Rent 20000

Manager 22000

Utilities 12000

Cleaning staff 6000

EMI for initial investment 20000

Interest Repayment 1% of investment Rs. 12,455.0

Supervisor 5000

97455

Misc (10% of above.) 9745.5

Total Rs. 1,07,200.5


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Appendix 4: Cashflow Forecast for Ambrosia as a B2C operator.

s Jan Feb March April May June July Aug Sept

No. of Parties 1 1 2 2 2 1 1 2

OPENINGBALANCE 0 -15,201 -30,401 44,399 1,19,198 1,93,998 1,78,797 1,63,597 2,38

INFLOW

Sales Revenue 200000 200000 400000 400000 400000 200000 200000 400000 60

TOTAL INFLOW 200000 200000 400000 400000 400000 200000 200000 400000 60

OUTFLOW

Rent 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20

Utilities 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10

Manager Salary 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22

Supervisor 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 53 Cleaning Staff 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6

EMI for initial

investment 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20

Interest

Repayment 12,455 12,455 12,455 12,455 12,455 12,455 12,455 12,455 12

Variable Cost 1,10,000 1,10,000 2,20,000 2,20,000 2,20,000 1,10,000 1,10,000 2,20,000 3,30

Misc. Costs 9,746 9,746 9,746 9,746 9,746 9,746 9,746 9,746 9

TOTAL OUTFLOW 2,15,201 2,15,201 3,25,201 3,25,201 3,25,201 2,15,201 2,15,201 3,25,201 4,35

NET CASH -15,201 -15,201 74,800 74,800 74,800 -15,201 -15,201 74,800 1,64

Closing Balance -15,201 -30,401 44,399 1,19,198 1,93,998 1,78,797 1,63,597 2,38,396 4,03


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Appendix 5: Income statements for Ambrosia as B2B

Year -2008 Year -2009

Sales Revenue Rs. 16,80,000 100% Sales Revenue Rs. 18,48,000 100%

Cost of Sales Rs. 9,60,000 57.14% Cost of Sales Rs. 10,36,800 61.71%

Labor - 20% 192000 11.43% Labor - 20% 220800 11.95%

Fuel - 25% 240000 14.29% Fuel - 25% 276000 16.43%

Meat - 35% 336000 20.00% Meat - 35% 386400 23.00%

Vegetables - 15% 144000 8.57% Vegetables - 15% 165600 9.86%

Spices - 5% 48000 2.86% Spices - 5% 55200 3.29%

Gross Profit Rs. 7,20,000 42.86% Gross Profit Rs. 8,11,200 43.90%

Fixed Expenses Rs. 3,60,000 21.43% Fixed Expenses Rs. 3,96,000 21.43%

Rent 260000 15.48% Rent 286000 17.02%

Utilities 60000 3.57% Utilities 66000 3.93%

Overheads 40000 2.38% Overheads 44000 2.62%

Operating Profit Rs. 3,60,000 21.43% Operating Profit Rs. 4,15,200 22.47%

Tax - 30% 108000 6.43% Tax - 30% 124560 6.74%

Profit After Tax Rs. 2,52,000 15.00% Profit After Tax Rs. 2,90,640 15.73%

Year -2010

Sales Revenue Rs. 20,51,280 100%

Cost of Sales Rs. 11,19,744 66.65%

Labor - 20% 242880 11.84%

Fuel - 25% 303600 18.07%

Meat - 35% 425040 25.30%

Vegetables - 15% 182160 10.84%

Spices - 5% 60720 3.61%

Gross Profit Rs. 9,31,536 45.41%

Fixed Expenses Rs. 4,35,600 21.24%

Rent 314600 18.73%

Utilities 72600 4.32%

Overheads 48400 2.88%

Operating Profit Rs. 4,95,936 24.18%

Tax - 30% 148781 7.25%

Profit After Tax Rs. 3,47,155 16.92%


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Appendix 6: Projected Income Statements for Ambrosia as a B2C

Year -2010 Year -2011

Sales Revenue Rs. 48,00,000 100% Sales Revenue

Rs.

53,76,000 100%

Cost of Sales Rs. 26,40,000 55.00% Cost of Sales

Rs.

29,04,000 60.50%

Labor - 20% 528000 11.00% Labor - 20% 580800 10.80%

Fuel - 25% 660000 13.75% Fuel - 25% 726000 15.13%

Meat - 35% 924000 19.25% Meat - 35% 1016400 21.18%

Vegetables - 15% 396000 8.25% Vegetables - 15% 435600 9.08%

Spices - 5% 132000 2.75% Spices - 5% 145200 3.03%

Gross Profit Rs. 21,60,000 45.00% Gross Profit

Rs.

24,72,000 45.98%

Fixed Expenses Rs. 12,26,406 25.55% Fixed ExpensesRs.

13,49,047 25.09%

Rent 240000 5.00% Rent 264000 5.50%

Utilities 144000 3.00% Utilities 158400 3.30%

Manager Salary 264000 5.50% Manager Salary 290400 6.05%

Cleaning Staff 72000 1.50% Cleaning Staff 79200 1.65%

EMI for Investment 240000 5.00% EMI for Investment 240000 5.00%

Interest Repayment 149460 3.11% Interest Repayment 164406 3.43%

Overheads 116946 2.44% Overheads 128641 2.68%

Operating Profit Rs. 9,33,594 19.45% Operating ProfitRs.

11,22,953 20.89%

Tax - 30% 280078 5.83% Tax - 30% 336886 6.27%

Profit After Tax Rs. 6,53,516 13.61% Profit After Tax Rs. 7,86,067 14.62%


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Year -2012

Sales Revenue Rs. 59,13,600 100%

Cost of Sales Rs. 33,11,616 68.99%

Labor - 20% 662323 11.20%

Fuel - 25% 827904 17.25%

Meat - 35% 1159066 24.15%

Vegetables - 15% 496742 10.35%

Spices - 5% 165581 3.45%

Gross Profit Rs. 26,01,984 44.00%

Fixed Expenses Rs. 14,83,951 25.09%

Rent 290400 6.05%

Utilities 174240 3.63%

Manager Salary 319440 6.66%

Cleaning Staff 87120 1.82%

EMI for Investment 240000 5.00%

Interest Repayment 180847 3.77%

Overheads 141505 2.95%

Operating Profit Rs. 11,18,033 18.91%

Tax - 30% 335410 5.67%

Profit After Tax Rs. 7,82,623 13.23%

Appendix 7: Growth Rates

Growth Rate for Current Business (B2B) Growth Rate for Proposed Business (B2C)

Year 2008-09 2009-10 Year 2008-09 2009-10

Sales Revenue 10.00% 10.00% Sales Revenue 10.00% 12.00%

Cost of Sales 15.00% 14.00% Cost of Sales 12.00% 12.00%

Gross Profit 7.22% 7.62% Gross Profit 7.56% 12.00%

Fixed Expenses 10.00% 10.00% Fixed Expenses 10.00% 10.00%

Operating Profit 5.83% 6.38% Operating Profit 4.34% 14.77%

Profit After Tax 5.83% 6.38% Profit After Tax 4.34% 14.77%


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Appendix 8: Competitor Analysis - Menus and Prices

FirmsNo. of Non-Veg.

Dishes

No. of Veg

DishesNo. of Snacks Water Beverages Deserts

Selling

Price

Sweet Caterers 3 6 5 Y 3 3 450-500

REDS 4 6 5 Y 3 4 500-550

Gyanji 3 6 4 Y - 2 400-500

J. Oberoi 3 4 3 Y - 3 400-450

Ambrosia 3 6 4 Y 3 3 400-450

Source: Company Brochures

Appendix 9: Competition Analysis Consumer Panel Research

ankings on a scale of 1 to 5)

Caterers Sweet Caterers REDS Gyanji J. Oberoi Ambrosia

Criteria

Snacks 4 3 3 2 2

Main Course - Veg 5 3 4 3 4

Main Course - Non-Veg. - 5 3 3 5

Dessert 3 4 3 4 3

Variety 4 4 3 3 -

Presentation 3 4 2 3 3

Service 4 3 4 3 -


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Appendix 10: Porters Five Force Analysis

With the bargaining power lying in the hands of Ambrosia in buying and supplying, it seems like an

attractive option. However, brand loyalty and substitutes may be make threat form substitutes high.

Moreover, the easy of entry for new firms may aid Ambrosia initially but it will act as a threat once it is

Competitive Rivalry

-Competition high, but not intense

-Brand loyalty prevails with

existing caterers

-product differentiation and

market development can be done

Buyers: Low

-buyer tends to have

moderate bargaining

power because of limited

competition in the market

-many buyers in the

catering market,

preventing buyer

bargaining power to rise

-varying factors liketaste, quality, dishes

make the product non-

homogeneous

Substitutes: High

-there is brand loyaltyfor existing caterers

-main substitute ishome cooking/hiringchef

-five-star hotels alsoform substitute and

provide good venuealong with catering

New Entrants: Low

-startup cost does not act as barrier

-already has experience in cooking

-lacks experience in dynamics and logisticsof the catering industry

-economies of scale do exist to some extent

Suppliers: Low

-almost perfect competition for foodsuppliers

- thus, higher bargaining power lies withAmbrosia

-no substitute products

-supplier has low bargaining power

shikhar bm ia

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