The business plan of Super Stars sports facility - Essay Example

The following is a business plan of Super Stars sports facility that is about to commence its operations. It outlines the executive summary of the sports facility, its vision and its mission statements. Business application packages have been used to conduct both an external and the internal analysis. Finally, the financial plan of the sports facility is provided. Contents Contents 3 Executive Summary 4 Vision Statement 5 Mission Statement 6 SMART Analysis 7 Stakeholders’ Analysis 8 Balanced Scorecard 9 External Analysis 10 Internal Analysis 13 SWOT Analysis 15 Financial Application 17 References 19 Appendix 22 Executive Summary Super Stars will be a sports organization which will be focused on enhancing and inculcating sports values among the community members in Bradford city in the United Kingdom. Currently, there are very few multi-sports facilities in Bradford and hence the company hopes to fill this gap. The kind of sporting activities that will be trained includes swimming, skiing, skate boarding, athletics, rugby, golfing, gymnastics, football and hockey. The organizations planned keys to success involves putting the customers wants first and working hard towards satisfying them. The organization will also use appropriate marketing facilities for its services, creating a conducive environment for its operations, purchase quality sports equipments and hiring qualified staffs to assist in the management of the activities. The Super Stars sports facility hopes to target people who have the passion for getting physically fit. It will provide all the necessary facilities that are required in order for people to exercise and attain maximum satisfaction. The members will be both adults and the children and it involves both genders. The sports facility will be a member’s only facility. The membership will be divided into a adult membership, students membership and junior membership. The juniors include children between the age of 5 and 14 years. The adults are those above the age of 14. The membership fee for the junior plan will be 40 pounds plus a 240 pounds annual subscription fee. The adults’ membership fee shall be 50 pounds plus an annual subscription fee of 360 pounds. However, students will be granted a fee waiver to encourage them to engage in sporting activities which include a 45 pounds membership fee plus a 300 pounds annual subscription fee. At the beginning of its operations, Super Stars sporting organization will use funds from the government and community contributions to finance its operations. The government has advanced 9,000,000 pounds towards the setting up of the facility. It hopes that the community will contribute 2,000,000 pounds. These funds will be used to purchase the necessary equipments, setting up the entire business, hiring trainers, and maintenance of the facility and equipments. The organization hopes to achieve 52, 000 pounds at the end of the first financial year. By the end of five years the facility hopes that the profits will have increased to around 250,000 pounds per year. Vision Statement The vision statement is a description of the picture of the organization in the long term or in the middle term. It is a clear picture of the organization that describes its desired outcome that seeks to energize, inspire, influence, and enables one to have a mental picture of what the organization hopes to attain( shank, 2005,p.75). It represents a framework for an individual’s comprehensive strategic planning and refers to the inspiration of the organization. It involves the articulation of the organizations dreams and hopes. It helps the organization in making a choice between the current and the future courses of action. It puts together the goals and objectives of the organization. In connection to sporting activities, the vision statement is set so as to provide it with a blueprint for success and set a foundation for what the long term goal is (Elitesportleader, 2012, p. 1). An effective vision statement should satisfy the following conditions. It should be clear and easy to understand; bridge the gap between the future and the present; provides organizational direction and purpose; ambitious and inspirational (Elitesportleader, 2012, p. 1). The Super Stars sports facility vision will be able to provide its members with the ultimate transformation and development of recreational sporting activities. It aims to revolutionalize the entire aspects of sporting activities by creating an atmosphere that provides the members with personal satisfaction and development. The organization is set to excel in the sporting activities way ahead of other sporting organizations in Bradford. It will apply all the available techniques to ensure that it attains a great market growth and customer market share. It is the company’s hope that it will be able to achieve the goals of shareholder’s wealth maximization, profit maximization, and cost minimization. Mission Statement The company’s mission statement clearly describes the main purpose of an organization. It is an action statement that outlines the reasons why the organization exists and what it is doing in order to ensure the achievement of its vision (Horner & Swarbrooke, 2005, p. 167). It encompasses the core purpose of the company, the core values to which the company is committed and the visionary goals that the firm will intend to pursue in order to fulfill its mission. It puts focus on the company’s present state unlike the vision statement that focuses on the future of the company. It communicates to the stakeholders, members and the general public the importance of the organization. According to David (2012, p. 17), the mission statement broadly gives the description of the company’s present capabilities, activities, customer focus, and business makeup. The Super Stars Company’s mission will be to provide the members with exquisite and aesthetic physical, psychological and social fitness. The mission statement of Super Stars sports facility will enable it stream line its decision making process and have clear knowledge of the future and the current objectives. It will also allow for easy extraction of the company’s objective from the mission statement. The mission statement should be able to outline the products and services offered by the company. It should also state the company’s philosophy, market; concern for survival, growth, profitability; self-concept, technology, concern for employees and concern for public image (Adam, 2009, p. 1). The sporting activities are essential as it helps the entire community physically, psychologically and also socially. Physically the benefits obtained are increased agility due to better body shape, exercise for the body, improved appetite, increase in strength and burning of extra calories. Socially the organization will promote social integration, create employment opportunities, infrastructural developments and improve tourism industry. Psychologically, they boost one’s confidence, enhance team and leadership skills, increase concentration and improve planning and analytical skills (Manali, 2012, p. 1). SMART Analysis The company’s objectives should always be SMART. That is, specific, measurable, achievable, realistic, and time-bound. SMART objectives are necessary for an organization as they will enable it to focus consistently on the functions of the organization, motivate teams and individuals to achieve a common goal, and enable the company to control its marketing plans (O’conor, 2000, p. 77). Super Stars sports facility has produced a SMART analysis whose specific objective will be to obtain a membership of approximately 1000 people by the end of the first year followed by a tremendous growth in membership to approximately 10, 000 ,members by the end of the fifth year. Super Stars objectives are measurable (see appendix 1) as it hopes to achieve 52, 000 pounds as profits at the end of the first financial year. By the end of five years the facility hopes that the profits will have increased to around 250,000 pounds per year. The company incorporates the time frame under which it hopes to achieve the objectives. For example, its target profit by end of five years is expected to be 250,000 pounds. Super Stars objectives are realistic as they match with other goals and objectives. The coaches are required to volunteer 30 hours each before they qualify to be coaches, which is relevant. Stakeholders’ Analysis Stakeholders’ analysis involves the establishment and identification of the projects key stakeholders, an evaluation of the stakeholder’s interest and how their actions and interests can influence the projects profitability and achievement of its objectives (West, 1988, p.4). The analysis assist in making sure that each stakeholder gets what they need and how they need it by ensuring that the outputs are communicated specifically and precisely to them (Emerald, 2012, p. 1). It requires that one must define the type and level of risk the stakeholders require, the reason or purpose why they require it, the frequency of communication and timing required, and their preference for the delivery mode. Stakeholders are the people or institutions who have personal interests in the project (Hillson, 2006, p. 1). Stakeholders are broadly divided into primary, secondary and key stakeholders. Super Stars have come up with a stakeholder’s analysis model (see appendix 2) to show the various stakeholders and their influence on the organizational success. It shows the various stakeholders, their priority, their risk perspective and their actions. The primary stake holders who include the employees have low preference for risk and any risk encounter will demotivate them. The secondary stake holders who include the customers and suppliers have interests in their satisfaction and technologically advanced equipments and have medium preference for risk. Balanced Scorecard It is a tool that is adopted by managers to help them in strategic performance management by keeping track of the operations that are carried out by the staff within their control and make a follow up of the consequences arising from these actions. According to (Bhlmani et al, 2008, p. 776), it helps in the transformation of the company’s mission statement into a set of measures of performance which grants the model for implementing its strategy. It is made up of four perspectives which are the financial perspective, internal business processes, learning and growth and customer’s perspective. The learning and growth perspective involves corporate cultural attitudes in relation to self improvement and employee training. Internal business process perspective states that managers should ensure that the services conform to the customer requirements. The customer perspective shows that the company should be keen on customer satisfaction and customer focus. The financial perspective states that managers should provide accurate and timely funding data. Financial related data such as cost benefit data and risk assessment should be provided (Kaplan & Norton, 1996, p.76). Super Stars organization learning and growth perspective will involve hiring qualified professionals or coaches to train the sports facility members. The coaches hired will be friendly to the members so that the members can easily communicate to them. The sports facility will also acquire technologically advanced tools to be used in training. The internal business perspectives involves business promotion through extensive marketing methods while financial perspective include the 9,000,000 grant from the government, 2,000, 000 from members’ contributions and the expected profit. The customer’s perspective in the company is applied in the Super Stars Company through great customer relationship and training (see appendix 3). External Analysis It is essential that in order for a business to succeed it must conduct the analysis of the surrounding environment which is characterized by factors such as demography, technological advances, social factors, economic factors, and politics, among others. It must also take into account other factors such as the threats of new entrants, opportunities, competitive forces and its market share (West, 2008, p.121). Super Stars need to put its target market into consideration as it may alter its performance. The target market may either be customers or the community at large. It should also consider its relationship with its suppliers. The organization needs to analyze its competitive advantage in the sports industry. It should look at the competitive forces and strive towards achieving profits that exceed the average for the sports industry. According to (Porter, 1985, p. 12-14), the competitive advantage of the firm can be derived from the cost advantage or even the differentiation advantage. Super Stars sports facility may attain the cost advantage by being the overall cost leader through delivering its services at a lower cost than that of its competitors. It may achieve the differentiation advantage through creation of unique and superior services over those of its competitors. Once the firm attains either the cost or the differential advantage, then the result will be superior value creation. PEST analysis is necessary in order to have a scan in the macro environment in which the company operates (Bailey et al, 2005, p. 43). It stands for the Political, Economic, Social and Technological issues that may affect business operations (see appendix 4). The company needs to understand these factors, how they affect the business operations and come up with ways to respond to these influences. Political environment is characterized by laws and regulations, environmental regulations, employment laws, and political stability (SMWW, 2012, p. 1). The economic factors influences the company’s cost of capital and the consumer’s purchasing power. It represents economic growth, inflation, interest rates, and exchange rates. The social factors are the cultural and the demographic aspects of the external macro environment. They include the age distribution, population growth rate, health consciousness and career attitudes. The technological factors include technology incentives, automation, technologically advanced equipment, and research and development activities (Middleton, 2002, p. 23). In the case of Super Stars, the PEST analysis is important as it helps it review the political, economic, social and technological factors in the environment. Super Stars need to put into consideration the social factors such as population, health consciousness of the community and age distribution. It also needs to acquire technologically advanced equipment in the gymnasium and other areas in the sports facility. Economically, Super Stars is required to analyze the amount of funds that are available for the start up and ensure that they are sufficient for its operations. It also needs to assess the purchasing powers of its consumers to avoid overcharging them which may lead to loss of customers. The pricing policy of the company is also an important factor in the analysis of the external environment of the business. The price set should be favorable to both the customers and the company itself. Super Stars will set a price that will give it maximum returns and at the same time it will be fair to the customers. It will assess the competitiveness of the market and the current economic growth rate in order to come up with an optimum price. The pricing policy will also be flexible so that it can be adjusted with changes in the prevailing market conditions. According to Leader & Krytis (1989 p.123), pricing policies can be divided into three areas which are customer oriented; competitor oriented and market oriented policies. Michael Porter’s five forces model is also used in the analysis of the external environment (Pierce and Robinson, 2003, p.69). According to Porter (2008, p.1), the industry’s attractiveness and long run profitability is influenced by the five forces. These five forces include threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and the degree of rivalry between existing competitors (see appendix 5). The five forces reduce prices of an industry’s products and services, costs and potential for long term profitability (Fyall & Garrod, 2005, p.62). Super Stars sports facility can use this model in order to develop a competitive edge over the rival sports facilities in the industry. The threat of new entrants in the sports industry will increase competition level which will lead to reduced attractiveness. It might be caused by high requirements for capital investment, economies of scale and access to the industry’s market. Super Stars therefore need to check if there is existence of entry or exit barriers into the industry. It needs to come up with new ways of training and more technologically advanced training equipments in order to be ahead of other sports facilities in Bradford. Worthington & Britton (2009, p.463) recommends that the power of each force should not be too great as this will reduce the attractiveness of the company to potential investors. Super Stars will look into the buyer’s bargaining power as it will most likely influence the demand of its services. It should strive to provide high quality services to attract the buyers (Bhalmani, Horngern, Datar & Foster, 2008, p. 25). The bargaining power of suppliers will be high if it takes high costs to switch to another supplier and incase of a threat of forward integration. Super Stars will deal with the effect of supplier power by creating long term relationships with the suppliers of its sports equipments so that they will always obtain high quality equipments and services. This will lead to high value of the business in the long run (West, 1988, p.98). Internal Analysis Internal analysis of a business is essential as it can be used as a planning tool and it helps the company find out its strengths and weaknesses. It puts focus on factors which give the business certain advantages and disadvantages in its operations with customers. Super Stars therefore need to carry out an internal analysis of the sports industry using several business application models such as the 7s framework, BCG Box (portfolio analysis), value chain approach and the product’s life cycle. The 7s framework which was developed by Mc Kinsey is a value based approach which describes how well an organization is effectively managed. The 7s are structure, strategy, systems, skills, style, staff, and shared values (see appendix 6). According to Hitchher (2003, p.78) these elements are divided into hard elements which are; strategy, structure and systems and soft elements which are; shared values, skills, style, and staff. The 7s framework is used by companies to assess and monitor changes in the internal situation of an organization. It is also used to examine the likely effects of future changes in the company and determine the best way in which a proposed strategy can be implemented. The 7 elements need to be matched well in order for the organization to properly succeed in its operations (Thomas& Robert, 2004, p.279). Super Stars’ hard elements are easy to define and describe and can be easily identified with the management team. They are the organization charts, strategy statements, IT systems, and reporting lines. The organization’s soft elements are hard to describe and are more influenced by organizational culture. All these elements are essential and interdependent and a change in one will affect the whole organization. Super Stars will use the strategy element to build competitive advantage in the sports industry. It will apply the skills element by hiring skilled and competent employees. The BCG growth share matrix is a model used for portfolio analysis which was developed in the 1970s by Bruce of the Boston Consulting Group. It classifies the company’s business units into four categories depending on the market growth and market share combinations relative to the large competitor. The four categories are dogs, question marks, stars and cash cows (see appendix 7). The relative market share determines the competitive advantage and while market growth determines market attractiveness. It assumes that an increase in market share will lead to increased cash generation while market growth requires investment in assets which results to cash consumption (Stahl, 2004, p.40). Super Stars cash cows can be the personal training of clients as this will generate cash and help hold the stars. The stars are the technologically advanced gym equipments and friendly trainers who are convenient and easy to use by the customers. The question marks in the company will be the exercise classes as the company is required to invest heavily in this sector in order to experience growth. The dogs in this company will be the old exercise methods which are being replaced by new methods. The product’s life cycle is a sequence that shows the various stages that a product undergoes from introduction, to growth, to maturity and decline (Stark, 2005, p.17). It influences the marketing strategy and the marketing mix because it associated with the changing market situation(see appendix 8). Super Stars should apply this model in order to know the areas that need much attention by marketing and what areas in the sports industry are on the decline. The several stages in the product’s life cycle are characterized by the revenue generated by the product. The company will strive to create product awareness and develop market for the product in the introduction stage. Super Stars being a new company is at its introduction stage and therefore it need to be promoted in such a way that members of public will be highly attracted. At the growth stage the company should strive to increase the market share and build brand preference by promotion activities and using penetration pricing strategy. At the maturity stage, the Super Stars should work hard to maximize profits and defend its market share due to high competition and diminishing sales. In the decline stage, the product becomes technologically obsolete and customer taste changes which leads to sales decline. At this stage, Super Stars can either maintain its services hoping that its competitors will exit harvest it or discontinue its fitness services (Gorchels, 2000, p.155). SWOT Analysis SWOT analysis refers to the analysis and evaluation of the company’s strategic factors which are the strengths, weaknesses, opportunities and threats (see appendix 9). Wheelen (2000, p.107) states that it helps the firm realize its core competencies and the opportunities which the company is unable to take advantage of due to lack of proper resources. It analyses the position of the business and its environment in order to find out the business strategies that will best align the organization’s capabilities and resources to the company’s environment. It is essential as it helps the firm predict the changing trends and include them in the decision making process of the organization (Edmund et al., 1969, p.100). The SWOT analysis is used to evaluate both the internal and the external aspects of the business sector. An internal analysis involves the evaluation of the company’s strengths and weaknesses. According to Thomas& Stapleton (1998, p.79) strengths of the company enable it to achieve its mission and ensure that the company achieves continued success. They include brand loyalty, customer goodwill, process capabilities, human competencies, and financial resources. Supers Stars strength is based on its ability to offer multisport activities to it members and hiring qualified trainers. Weaknesses of the company are the qualities that will hinder it from achieving its mission and leads to a drop in its growth and success. Super Stars weaknesses might be poor decision making, narrow product range, and obsolete equipments, among others (Dibb& Simkin, 2004, p.24). An external analysis involves evaluating the opportunities and threats that the organization have no control of. Super Stars may take advantage of opportunities within the environment which the business operates to gain competitive edge. It can execute this opportunities in such a way that it will enable attain desired profits and targets. It can acquire new equipments and install technologically advanced equipments in order to attract more members. The opportunities may be presented by the technology, government, market, competition and the industry itself (SBA.gov., 2012, p. 1). Threats come up when the external environment negatively affects the profitability and the reliability of the company. Threats to Super Stars may be reducing industry profits, price wars, developing technology and employees’ unrest. Financial Application Super Stars Balance Sheet Fixed Assets ? 9,360,080.00 Current Assets ? 1,703,820.00 Total Assets ?11,063,900.00 Current Liabilities ? 63,900.00 Capital Invested ?11,000,000.00 Profit and Loss ? 52,000.00 Capital at end of year ? 11,063,900.00 Super Stars Profit and Loss Account Expenditure Income Sales ? 5,000,000.00 Cost of Sales ? 2,000,350.00 Gross Profit ? 2,999,650.00 Overheads ? 2,947,650.00 Net Profit ? 52,000.00 Retained Profit ? 52,000.00 Super Stars Cash Flow Statement Cash Flow From Operating Cost Received Money Out Net Cash At Bank ? 3,000,270.00 Membership Dues ? 1,000,478.00 Government Grant ? 9,000,000.00 Members Contribution ? 2,000,000.00 Total Money In ? 15,000,748.00 Equipment Storage ? 865,080.00 Minibus Tax ? 98,586.00 Minibus Tax ? 268,686.00 Total Money Out ? 1,232,352.00 Net Cash Flow From Operating Activities ? 15,000,748.00 ? 1 ,232,352.00 ?13,768,396.00 Cash Flow From Investing Activities Total Money In - Equipment Purchased ? 389,330.00 Total Money Out ? 389,330.00 Net Cash flow From Investing Activities - ? 389,330.00 ? 389,330.00 Cash flow From Financing Activities Total Money In - Total Money Out - Net Cash Flow From Financing Activities - - - Net Cash Held ? 15,000,748.00 ? 1,621,682.00 ?13,379,066.00 References Adam, K., (2009), Mission statement, retrieved 24 March 2012 from < http://www.mba-tutorials.com/strategy/34-mission-statement.html>. 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Wheelen, H., (2000), Strategic Management and Business Policy, New Jersey: Prentice Hall, p. 107. Worthington, I., & Britton, C., (2009), The business environment (6th Ed), Harlow: Financial Times Prentice Hall, p. 463. SMWW, (2012), Sports Business Management, retrieved 25 March 2012 from . Emerald, (2012), Sport Business and Management, retrieved 25 March 2012 from . SBA.gov., (2012), Starting a Business, retrieved 24 March 2012 from . Appendix Appendix 1: SMART analysis Appendix 2: Stake holder analysis Appendix 3: Balanced scorecard Appendix 4: PEST analysis Appendix 5: Porter’s five forces Appendix 6: 7s Framework Appendix 7: BCG Box Appendix 8: Product Life Cycle Appendix 9: SWOT analysis Appendix 1: SMART Analysis Specific- giving appropriate opportunities to trainers to train the members of public. Measurable- the number of embers that can train in the sport’s facility and the amount of profit gains that is obtained from the organization’s profit. Achievable- each sport activity is trained thrice a day and six days a week and training equipment needed available. Relevant- coach thirty hours voluntarily as they will gain qualification. Time-bound- a five year target to achieve 250, 000 pounds in five years. Appendix 2: Stakeholder analysis Stakeholder Priority VH/H/M /L/VL Stakeholder’s perspective Action Primary Coaches Employees high Satisfaction Careers Strikes Demotivation Secondary Customers Equipment suppliers community Very high social responsibility employment opportunities technological advancement new equipment lack of community interest loss of members increased cost of equipment Key stakeholders Bradford community Government High voluntary coaching to qualify to be a coach company’s promotion grants lack of volunteers grant reduction Appendix3: Balanced score card (Kaplan & Norton, 1996, p. 45) Appendix 4: PEST Analysis Super Stars will put into account the following political, economic, social and technological factors to analyze its threats and opportunities. Political- the government policy, political stability, tariffs and government grants. Economic- purchasing power, inflation rates, interest rates and product affordability. Social- population growth rate, population composition, age, gender and education of the population. Technological- technologically advanced equipments, price of new technology and new products entering the industry. Appendix 5: Five forces model Appendix 6: 7s Framework Strategy- refers to the ways in which the business intends to use in order to achieve its goals and create a competitive advantage. Structure- the organizational hierarchy regarding the responsibility and accountability. It refers to the either functional organization of the company, geographical or product market. Systems- activities of the company that ensures that the business operations are done effectively and efficiently. Style- the business culture which influences the leadership style and how the leaders behave in relation to their employees, customers and stakeholders. Staff- refers to the company’s personnel and their abilities, skills and attitudes. Skills- special competencies that the business have due to the combination of staff and systems. Shared values- the core values and beliefs of the company. Appendix 7: BCG BOX High Relative Market Share Low Stars (dominate the market) 9 million grant. 2 million members contribution Question Marks(high growth potential0 Clubs, organizations, and schools Volunteers Personal training sessions Classes Skating Cash Cows( making money is a guarantee) old classes Dogs( dying out) High Market growth rate. Low Appendix 8: Product Life Cycle Model Maturity Decline Growth Introduction The product life cycle comprises the four stages as shown above. At the introduction stage the sales will be low until the customers are aware of its benefits. Growth stage is characterized by rapid revenue growth as sales increase is caused by increased knowledge of the products existence by the consumers. Maturity stage is the most profitable as sales continue to increase but at a slow pace due to strong brand awareness. Finally, the product approaches the decline stage where the business may choose to discontinue its operations, harvest the product or maintain the product in the hope that the competitors will exit. Appendix 9: SWOT Analysis POSITIVE NEGATIVE Strengths diverse sporting activities employees commitment revenue and profits from activities Weaknesses limited participants per training session unqualified staff obsolete equipment Opportunities Technological advancement New equipment Local community opportunity to obtain training. Threats Economic crises Increased equipment price Entry of new competitors Read More