Evaluation

 

Although my business plan might seem quite a good perspective on the paper, there were several, very important changes in the world which can dramatically affect the way my business is run and the chance of this business succeeding and starting to actually bring the profit. There were several major and minor constraints and I will start of with the minor ones.

To begin with, although, my research was relatively deep and informative, my main error in obtaining the data was the way I have asked people. The way I did it was relatively simple, I decided to ask 200 people, 100 of which were male and the other 100 were female. I would ask anyone on the street between any age from about 5 up to 60 and over. Then I put all the data obtained into a table and divided the responses into different groups, according to the age of my respondents. The main problem with this method is that it didn’t have any structure, and it would be much better to decide how many people in each age category I’m going to ask and what gender, before I actually started doing the research. In my case it turned out that I’ve asked too many young people and spent less time on surveying the older category of my respondents. This could make my data bias, leading to inaccuracy, because the young category of people is not necessarily the one which is most likely to buy my products. For more accurate results, it is very important to have responses from an equal number of people from each age and gender category. This mistake will be prevented in any further research that I will undertake, as I now have more experience of surveying, writing the questions that target particular groups of respondents in my questionnaire, preparing the structure of my future sample and the way I will interpret the results that I get in the end, before I actually start surveying my respondents. The structure of the survey is important, because if I, for example, decide to ask some mechanics at the petrol station whether they would like to order one of my cakes, the response is likely to be inaccurate, because these people are likely to be in a lower social class, earn less money, and therefore, be less likely to spend their money on such luxuries as custom-made cakes. Therefore, even if they answer all my questions, their response will be irrelevant, because they don’t even want to buy my products. Their response to the price that I’ve set, for instance, is also likely to be irrelevant, because the amount of money that they are prepared to spend on a custom-made cake is very limited and the word “expensive” has a different meaning to everyone, especially if the respondents are in a different social class, gender or age category in particular.

 

The most minor effect on my business is likely to be environmental, because my business will hardly be making any harm to environment, as I will not be using much package, and even if I do, these will be recyclable carton boxes. In the short run I will not offer a delivery service, so I won’t have any vehicles that will be producing CO2 gases and harming the environment. However, I have to notice that, if I do introduce a home delivery service, my business will in that case affect the environment by producing these harmful gases. In this case I can also reduce this negative impact upon the environment, by buying an electric car or a car with a hybrid engine such as Toyota “Prius” which are becoming more popular and available, and which will produce very little amounts of CO2 if anything.

 

One of the legal constraints that can realistically affect my business is obtaining a license in order to produce cakes. Due to the fact that the UK government wants people to have a more healthy diet and reduce the number of fast food products and food that has saturated fat, it is likely to be more difficult to produce such products as cakes, because they high amounts of saturated fat. However, even if this constraint affects my business, it is possible to use other ingredients e.g. sweetener instead of normal sugar in order to reduce the amount of saturated fat and make my products (cakes) healthier. Therefore, this constraint is a minor one, because it can be avoided if necessary.

 

Nowadays, people are becoming more and more aware of what they eat, and another slightly more significant constraint is the social trend, whether people will stop eating such sweet food as cakes in order to keep a healthy diet, or whether it will not have a significant impact upon the demand for such products as cakes. Again, I’m making custom-made cakes for such special events as birthdays and Christmas, and this means that I’m not encouraging people to eat my cakes everyday, and neither am I trying to sell my cakes to people to eat them on a day-to-day basis. They are expensive, and they are for the special events, and people will always celebrate them, and more likely to make an exception and eat one cake a year. Although, the social trend to eat healthy food is becoming more popular, I don’t think it will affect my niche products significantly.

 

Moving on to the more important constraints, I’m going to mention the technology. To date the development of technology and robotics is benefiting many businesses. In my case it will to a certain extent affect my business. For example, if there’s a new accounting package introduced or a form of making an order through a similar way as Internet, I might have to introduce it, to encourage more customers and offer them a more convenient method of ordering the cakes as well as keeping up with my competitors or be ahead of them, if they are not the first to introduce such method. However, this will only affect my business in the long run, because in the short run I will hardly use any computer equipment.

 

The second most important constraint for my business is- competition on the market and being competitive. Although custom made cake market is a very niche market, there are still some competitors existing for a while in the UK which already have customers and fully advertise and promote their products using most media sources such as newspapers, special cooking magazines and Internet. My business will be a new one on the market, and, therefore, I will have to make my best in order to prove to the customers that my business is no worse than others. It will also take me a long time and a lot of money to promote my products and the name or brand of my business, and make people aware of my products and business, whereas other competitors will have an advantage. I will have a limited budget to be spent on advertising, which will also be a major constraint for my business (Victorio Cakes) at least in the short term, because if my business works out well, this may not be a major constraint in the long term, as I will be able to increase my budget that can be spend on advertising and promoting my products.

 

The most important constraint, which will highly affect my business is both the economic and financial one. It is first of all, a financial one, because it will be difficult to rise enough finance and keep a good cash-flow and break-even in the short term, and the first year especially. This financial constraint is also directly related to the economic constraint, because my financial plans and sales forecasts may not be relevant, as the economic situation has currently changed quite dramatically. Below I’ve written a little more analysis with some figures obtained from my secondary research, in order to make the most accurate predictions and my vision of the situation. I’ve also done this, in order to make an appropriate consideration and evaluation of all the factors and constraints that can affect my business, to make a decision on whether or not to start up my business.

 

The main concern is the potential cake market, that is available for my business. In my marketing plan, I’ve said that £1,47bn is a size of the cake market in the UK in 2007. Firstly, if I was going to run “Victorio Cakes”, it would happen in the beginning of the year 2009, which means that by this time, the situation on the cake market might change and the growth may change into a recession. Secondly, although it’s a figure for the UK, in the short term my business will be located at Birmingham, which means, that the size of the cake market will change as there are many other big cities and areas in the UK, which might consume large amounts of cakes. This makes the potential to grow slightly limited, of which I took a notice, which will affect my decision in the end. In my financial data such as my Cash-flow forecast, balance sheet and profit and loss account, I have taken the more likely outcome, but not the best one which is likely to happen to my business. However, the sales may not be as high, and it may take a much longer time than I expected, in order to promote my products, make my business well known and build up the reputation, to encourage people to buy my cakes.

 

Another concern of mine was that over the time that it took me to do this unit of coursework, one of the major factors, which I have previously predicted in my PEST analysis, was an economic factor and rapidly developing in the UK as well as everywhere in the world, financial crisis. Over this time UK has gone from a fear of crisis into a beginning of the deep recession, when the thousands of jobs have been cut all over the UK, and by the end of the year 2008, different informational resources promise 100,000 people to be unemployed. This means, that these people won’t be able to pay back their mortgage and their houses might be re-possessed, which will cause an inflation, unemployment and other problems within the UK, as well as decrease in the demand for goods and services. The only goods, for which the demand will remain the same, as I identified in my PEST analysis, are going to be food and clothing, and such basic things as a house, water and electricity supply. Many people in the UK are likely to turn from buying luxuries, including custom-made cakes to buying necessities such as bread, milk and water. This will effectively decrease the demand for the custom-made cakes- the products, that I initially wanted to sell and set-up my business to make these products. Although, in my PEST analysis I said, that a possible solution to this problem is to produce budget cakes, or less expensive ones, in order to maintain a demand. However, there are too many competitors and large firms which specialise at making cheap cakes, which will be very difficult to compete with for my small start-up business. In addition to this, the economic situation has already got to such a stage, when opening your business is very dangerous and risky, partially because the bank don’t give out loans that easily, and it’s generally difficult for all banks worldwide to operate properly. This means, that I’m less likely to obtain a loan from the bank, and more likely to have problems with transferring money to my account, if the customers use their credit cards to pay. According to my further research, some shops even stopped taking credit cards, because the money simply doesn’t come to their accounts, or it takes a very long time, which will cause poor cash-flow in my potential business as well as everywhere else. Although I think I have provided enough evidence to obtain a bank loan and prove that my business has high chances of becoming profitable, even though there was a number of errors that I have committed during my research process, I consider the current economic situation in the UK economy to be too risky, in order to start-up my own business in January 2009. Therefore, it would be better for me to wait for a couple of years for the situation to stabilise in the UK economy. Before people get new jobs, and the demand for products starts to increase again, it’s too risky from a strategic point of view to start my business. Even if the bank gives me a loan, to start the business, I will simply not be able to sell enough cakes in order to break-even due to a decrease in the demand for such luxury products as custom-made cakes and the lack of money that many people in the UK have. To conclude, I would therefore like to say, that I have provided sufficient evidence to start-up my own custom-made cake business, however, I think that I shouldn’t start up my business now, and my business plan should be re-considered again in a certain period of time. In this case, the further market analysis and research will be needed, because the situation on the cake market will change, and I might have to look at different methods of promoting my products and making sure there’s a high demand on the market for them, to make sure that my business will be successful and able to rise enough finance, maintain good cash-flow and break-even.

 

Additional Materials:

 

SWOT analysis of “Victorio Cakes”