BUSINESS PLAN FOR ESTABLISHING A TRAINING CENTER FOCUSING ON SOFT
SKILLS BY AN AMERICAN FRANCHISE IN THE KINGDOM OF SAUDI ARABIA
Requirement of MBA Studies 2015
Student Name: Mohammed Alshwaier
Student ID : 10451986
Supervised by Prof.
John Cullen
Table of Contents Executive Summary……….4 1.0 Introduction ... 5 2.0 Industry Analysis ... 7 2.1 Economic Environment ... 7 2.2 Political Environment ... 8 2.3 Cultural Environment ... 9 2.4 Training Industry ... 10
2.4.1 Market Size and Competition ... 10
2.4.2 Business Opportunity and need ... 13
2.4.3 Growth and development of training Industry in KSA ... 16
2.4.4 Saudi Arabia Trade Policies ... 18
3.0 Company Profile & Business Strategy ... 19
3.1 Company overview ... 19
3.1.1 Vision of the Center in KSA ... 20
3.1.2 Mission Statement ... 20 3.1.3 Fundamental Principles ... 21 3.2 Business Strategy ... 22 3.2.1 Franchise Model ... 22 3.2.2 Management Plan ... 30 4.0 Marketing Plan ... 32 4.1 Marketing objectives ... 32
4.2 Target Markets and Segments ... 32
4.3 Position Strategy ... 36
4.4 Market Entry Strategies ... 37
4.4.1 Green Investment ... 37
4.4.2 Joint Ventures ... 38
4.4.3 Collaboration ... 39
4.5 Product Strategy ... 39
4.6 Distribution channels and Partners ... 41
4.7 Promotion Plan ... 41
4.8 Pricing Strategy ... 43
4.9 Sales Approach ... 44
5.0 Financial Plan ... 45
5.1 Sources of Capital for the Franchise ... 45
5.2 Expenses ... 45
6.0 Conclusion and Recommendation ... 49
Executive Summary
With constant growth in competition among the organizations across the world, the workplace has become one of the intense social space rather than homes. The employees need to communicate with their fellows as well as the customers of the organization. However, they need soft skills that will enable them do so effectively. As such, almost all organizations across the globe need individuals with such skills to ensure the success of their organizations. This
particular business plan paper aims towards exploring the viability of founding a training center that focuses on the provision of super-quality soft skills in the fields of English, IT and other necessary needed soft skills in Saudi Arabia.
Ideally, the Kingdom of Saudi Arabia is one of the countries that experiences increased economic growth and the use of technology have drastically increased throughout the last one-decade. With many multinationals and other local companies being founded in this country each day, the need for well-trained personnel with high-quality skills is on the increase. Training in IT and soft skills in The English language forms the basis of this.
The project starts with an introduction whereby the Franchise need in the Kingdom of Saudi Arabia is critically evaluated. In addition, the soft skills are introduced and reviewed to measure critically its importance to this society. The next part of the project is the literature review section. Under this part, the author analyzes the training industry in the Kingdom of Saudi Arabia as a means of finding the gap or the niche to be filled by the Franchise.
Particularly, the market forces, as well as other macro-environmental factors, are evaluated under this section. In one hand, this section provides the Franchise with the opportunities to exploit and areas to fix in order to ensure its success in the industry. On the other hand, the market in relation to the market size and competition are discussed under this section. Next, the Franchise theory and its benefits to the Kingdom of Saudi Arabia are discussed to evaluate the organizations possibility of turning out successful in the both its projected short-term and long-term goals.
Subsequently, the paper moves to the Franchise section. In this part, the project starts with an overview of the Franchise whereby its mission and fundamental principles are discussed. Besides, the management team, the hired employees and key partners of the Franchise are
discussed under this section. In addition, the objectives of the business or the Franchise are described. Next, the target market, customers, expected growth in the industry are also
disclosed. After this, competition and market position of the Franchise are evaluated. This takes us to the strategy section whereby all the marketing techniques and approaches are discussed.
Next, the paper covers the financial planning of the Franchise. Under this chapter, the author critically reveals the overheads involved and the materials purchases budget. All the finances needed are evaluated to give the start-up cost of the business. And all start-up
requirements are fully discussed under this part. Next, the paper shifts to the sales forecast and summary of the strategy implementation plan to ensure the success of the Franchise. Finally, the milestones of the business are discussed and a list of references fixed at the end for credibility purposes.
1.0 Introduction
Over the past one decade, the global economy has experienced growth and development with various new businesses being established each and every day. Yozgats and Karatal (2013) realized that this has created stiff competition in the marketplace among international and local business organizations. To curb this competition, organizations have identified employees as a key component that makes it possible to gain the competitive edge in the today business environment. Ideally, employees directly interact with the customers thereby determining their purchase behavior. As such, the employees hired by organizations must possess the needed skill that ensures the firms prosper in the marketplace. Necessarily, a well-trained workforce is an important tool for 21st-century companies. This is a business plan paper that focuses on the viability of establishing a Franchise training center to provide the needed soft skills to the Kingdom of Saudi Arabia population.
What are these soft skills that are highly demanded in the new workplace? Harrison (2013) associates soft skills to the Emotional Intelligence Quotient (EQ), social graces, personality traits, personal habits, language, communication and other behaviors that
characterize relationship with other people. These skills compliments the hard skills (academic skills) required by today’s organizations to perform the tasking activities. The soft skills enhance individual interaction with others and boost the ability to perform some specific tasks. More importantly, the skills are very critical in the interaction between the employee and customers.
The Kingdom of Saudi Arabia is one country that has experienced economic growth as well as development over the previous decades. According to Abu (2014), Saudi economy is one of the largest among the six other oil-producing countries in the Gulf region. Based on this, the country has attracted most investors as well as business entrepreneurs to invest in different sectors of the economy. The government on the other angle supports the economy and
utilization of latest technology in all the several industries. Due to the massive economic expansion, various businesses have been established that high values high-end quality soft skills for their success in the Saudi competitive business environment.
This has resulted in demand for qualified professionals who can support the
organizational structure and ensure the projected success to the different sector organizations. Even though, most of the Saudi population is a graduate, research conducted by Lock et al. (2013) reveals that the graduate lacks the required skills by most firms for prosperity. For instance, quality English language and IT skills are needed in Riyadh, Saudi and in the other GCC region. Many fresh graduates from the different colleges and universities find themselves irrelevant in the job place. This has made them look for extra training on soft skills that can open doors to their career path and prosperity in the new intense job place. Marinov (2013) explains that most graduates are turned back due to lack of these basic skills that are applicable in the fast ever-changing work environment in Saudi Arabia and its environment.
Even though, there are already established training centers in different cities in the country to train people on these basic skills, the demand is too high, and the existing institution cannot match the population with the right needed soft skills. Malik et al. (2012) notes that the Kingdom of Saudi Arabia has one of the fastest growing populations induced by the growing economy. The need for education and training centers continually grows with time. The Saudi Arabia government has been in forefront encouraging education in English language programs and investing in IT programs. With this common trend, there is no doubt that, there is a need for establishment of more training centers to provide the growing population with high quality training that will provide them with the language and IT skills that are needed in today's economy for the suitable jobs in this fast-changing job market.
The ENGLISH Center is an American franchise chain that shall focus on providing this needed high-quality and high-caliber training in the field of IT, English and other needed soft skills, in the Kingdom of Saudi Arabia and possibly expand its operation to the rest of the Gulf Region. The viability of establishing this business is discussed in terms of the existing niche, competition in the industry, costs and profitability of the business in Saudi Arabia and its neighborhood.
2.0 Industry Analysis
2.1 Economic EnvironmentThe Kingdom of Saudi Arabia economy is an all-inclusive economy that experiences growth and development in all industries. Being one of the leading petroleum producers the country gains influx of income from its petroleum product exports. Saudi Arabia experiences constant economic growth and development annually. According to the latest Forbes (2015) reports, the country's economic growth is ranked third though there is a disparity in the
distribution of wealth to its population. Based on this, there is an influx in the establishment of new businesses in the country in almost every sector. Training remains one of the important industries in the Kingdom of Saudi Arabia.
According to Andrew (2015) reports, the Saudi Arabia training sector is an overwhelmed industry with almost three billion Saudi Riyals circulating in this particular market. The growing need of soft skills by the several competing companies has made it mandatory for employees to seek for the skills. The Saudi government supports education and IT programs to its population as a means of equipping them with the necessary skills to suit the ever-changing job market. For the last two years alone, the Saudi government has spent almost 1 billion Saudi Riyals in an attempt to equip its youth and the growing population with the needed soft skills in the growing
economy. Most participants in this industry post annual high turnovers as well as profit margins. Bosik (2012) explains that, in the last financial year alone, Al Khaleej Training Co., which key participant in this industry posted a 20% growth in its profit from the previous year. Ideally, this industry is thriving well with the general growth and development of Saudi economy.
2.2 Political Environment
Even though, Saudi Arabia borders some clashing MENA countries; Saudi is a politically stable country that its governance supports economic growth and development. According to Andrew (2015), the Kingdom of Saudi Arabia government concentrates on modernizing and developing the economy of the country to become the regional powerhouse. Since the country majorly relies on trade, the government implements trade policies that are favorable and
encourage investment in the country. This role is left to the Ministry of Commerce and Industry that formulates working policies that promote both the local companies as well as the
international ones. The movement in and out of the country is not restricted to the foreigners since they only need traveling Visas and work permits. These documents are not difficult to obtain, and this encourages people to visit and invest in the country.
In regard to the training industry, the country has done all it can to promote the education of its citizens through policies as well as financial support. Despite being Arabic country, the government policy promotes acquisition of English language as well as IT skills that are very vital to today's economy. In fact, it is the government policy to provide tax reduction to training centers or educational institutions that focus on equipping its population with the needed skills.
Subsequently, the country's policies protect the rights of individual businesses established in the country. Being a member of the Paris Convention for the Protection of Industrial Property, Saudi Arabia intellectual property laws protects the trademarks, copyrights and patents of the various businesses registered in the country (Andrew, 2015). All the trademarks are registered
and protected as required by the country's Trademark Act. Besides, the copyright law protects intellectual works as well as registered firms. In one hand, violation of the individual rights is strictly followed and punished based on the provisions of the law. On the other hand, the Directorate of Patents at King Abdul Aziz City for Science and Technology (KACST), grant requests and protect the rights for 20 years.
2.3 Cultural Environment
Even though, there is strict gender separation in the country and at all workplaces, the law does not restrict the participation of gender in educational and training programs. Marinov (2013) explains that, various schools, universities, as well as training institution, are available to both women and men. In 2014, almost 3.5 million young Saudis including men and women were enrolled in several universities and other higher learning institutions. The culture allows for all the genders to get quality and equal educational access through their roles in the society differ. However, is important to note that Saudi is the original homeland of Islam. This religion plays a great role in the daily life of most Saudis. Why is this important? Any business firm must acquaint itself with this people's culture in order to operate effectively. On one hand, any
business established in the country must be aware of the closure of activities for 20 minutes daily to allow the workers to pray. And the workers must be granted Ramadan holiday. Moreover, for training institution, the soft skills offered must be in line with the societal etiquette. Respect forms the basis of this culture and as such it should be incorporated in the organization training program for its products to be acceptable to the entire society.
The communication amongst people in the country is always done in either Arabic or English language. However, interaction using internet and multimedia is highly controlled by the government. Andrew (2015) explains that many pages on the internet and newspapers are
and feeling things before they settle for purchasing it. To sell to these fellows, the organizations have been forced to make direct contact with them. This initiates the need for employees to have soft skills that ensure effective customer engagement for purchase. Even though, the E-business has not become popular in the country, it has started taking center stage on the sale of some products across the country. This prompts for the need of IT skills in the new business platform. 2.4 Training Industry
The Saudi population is characterized by a purchase behavior that has forced very many organizations to demand employees who apply soft skills in dealing with their customers. More and most corporations in Saudi Arabia see the acquisition of these soft skills as the only means to gain a competitive advantage in the market. A well-trained workforce on soft skills shows
optimism and vital competencies in ensuring the organization's to fix and install these needed skills to the Saudi workforce. Acquisition of the soft skills trademarks the organization for high levels of professionalism and excellent customer service.
2.4.1 Market Size and Competition
The Saudi training market has expanded indeed in the last two years. According to Metz and Library of Congress (2015) reports, in 2014 alone, the education and training providers secured a deal worth £1 billion with the Saudi government. The kingdom of Saudi government concentrates on prioritizing education and training for economic growth and sustainability. To do this, the government is devoted to reforming its technical and vocational training to the Saudi population. With a half of the country's population that is concentrated in cities being below the age of 25 years, the country is committed to ensuring the population is equipped with the basic skills needed by today's companies. The Saudi Arabian government invests heavily in training programs to ensure a knowledge-based workforce to its jobs as well as the existing companies in the country.
The training market in Saudi Arabia is quite broad and needs the establishment of new institution to bridge the gap. Nabti (2014) notes that, the Saudi Arabia training sector experiences a continuous yearly growth of over 5%. In fact, a recent report that was objectively aimed
towards relating the importance of vocational training to Saudis revealed that the sector
experiences an astonishing value of SR 10 billion annually. According to this report, the number of students that register for these training every year almost increases with 10% (Metz & Library of Congress, 2014).
Solomon (2013) notes that most postgraduate students that graduates from the various graduate schools and universities register for the short training to equip them with the needed skills in the job place. In the recent past, the Saudi government has encouraged education to females and within the last two years, the job market has experienced increased number of graduates from universities.
Based on the increased number of students and graduates that demands the soft skills, several training institutions have risen to compete for these available opportunities. There is an open competition in the field of training programs in the country. According to Wilson (2014), this positive environment has led to the establishment of several training centers and facilities across the country to equip the population with soft skills for the job market. Reports prepared GOTEVOT (the General Organization for Technical Education & Vocational Training) 2013, there are almost 936 licensed and registered training institutes in Saudi Arabia. However, the key participants in the industry include Cambridge International Certificate of Information
Technology, Al Khaleej Training Co., and Hatem Al-Durian Training Institute amongst others. Cambridge International Certificate of Information Technology and Al Khaleej Training Corporation are the key competitors in the training industry. Alkhaleej, for instance, has been in existence for quite long and it tends to have the largest share of the market. According to
Peagamand Stitt 92014), Al Khaleej Training Co. has been providing training services in the Saudi education industry for more than ten years. In fact, Al Khaleej reported Q3-2014 net income of SAR19.9mn. This was an increase of 7.2% in net income compared to the previous year's financial results. On the cumulative 9-month basis, the corporation posted a net income of SAR57.1 million that is an increase of almost 20.5% compared to the initial year's results posted.
Despite the key participants gaining maximum profit in the industry, several initiated institutions in the industry also experiences increased growth in profit just one year after the takeoff of the business. Solomon (2013) explains that the common increase of profit among the organizations results from the increased number of sales to trainees who keep increasing in number every year. Ideally, the training institutes compete in terms of the prices charged for their training programs. However, the disparity in prices is not that large, all the companies charge almost same prices for the training programs.
Most of the trainees in these institutions consist of the young Saudis who are looking for appropriate skills to fill the job opportunity that exists in the Saudi market. According to Wilson (2014), almost 70% of the registered trainees in most of the training centers are below of age 30. Despite the several training institutions being established in Saudi Arabia each year, the number of the people requiring the basic job skills is still greater than vacancies in the institutions. In recent reports by Department of Information & Research at the Riyadh Chamber of Commerce & Industry, most graduates and postgraduate students require these soft skills to develop in their careers. As such, the Chamber of Commerce and Industry highly encourages investors and companies to set up training centers in regions of high population. In addition, most of the established institutions are found in the North, West and East while the South of Riyadh left with very few (Metz & Library of Congress, 2014. Arguably, the training market in the south presents broad opportunities for the investors who may be interested in investing in training centers.
Even though, the key participants exist in the training industry, most people are not aware of their products and services in the market. Most reports advise new investors in the industry to concentrate on creating awareness amongst graduates and employees that need to be trained in the soft skills required by the current job market. Besides, there is a need for diversification in the training industry so as to incorporate all the necessary basic and primary skills required by today's companies. Marinov (2013) notes that most training institutions concentrates on competing for the share market instead of specializing in the skills needed by the current labor market and those that can serve all areas of employment.
2.4.2 Business Opportunity and need
Despite the large number of training institutions in KSA, the demand for soft skills remains high in the country. Andrew (2015) notes that, even after the entry of international training institutions in the country such as Cambridge, the number of trainees requiring skills remains high. In fact, the need and market for training institutions increases by almost 20% every year. According to reports filed from Chambers of Commerce and industry, only some few foreigners have invested in the training industry and the sector is soaring almost SR 10 billion annually. Furthermore, the government of Saudi Arabia has given the training sector the necessary attention it requires since it involves preparing young Saudis for the local and international market.
More importantly, the training industry in KSA is an open industry where each and every investor can participate. The sector has a positive environment where any new business can start off and thrive well. Recent reports compiled by Abu (2014) indicates that, almost 98% of the new training centers established in Saudi each year experiences increased growth and
performance of any business set up in the industry. The chances of becoming prosperous in the industry are higher compared to chances of failing.
On the other side, there is an acute demand in several training fields in the kingdom of Saudi Arabia. Solomon (2013) explains that, there exists a severe shortage of quality IT and English language instruction skills that matches the needs of the current market in the training industry. For instance, many people in Riyadh require Basic English skills and useful training courses that can lead them to success in the stiff competitive job industry. Unfortunately, the existing training institution in the area does not offer these specific soft skills.
Subsequently, there is a serious shortage of highly –qualified professionals and well trained native English speaking teachers to fill in vacant positions in the educational institutions. The Saudi government concentrates and put more efforts in improving education sector through promoting English language skills. This fact presents opportunity for most investors to show interest in the industry. In fact, training institutions that can show interest in promoting quality training can highly gain support from the Saudi government.
Pushed by the forces of the current job market, the country’s government shows a lot of commitment and effort in training its young population for future prosperity. Ideally, the Saudi governments do not spare importation of education technology but also embraces technological expertise from all parts of the world. According to Wilson (2014), the Saudi government promotes and encourages establishment of quality English language and IT training centers in the country regardless of the country of origin of the institution. As such, establishment of a super quality IT and English institution has upper hands in prosperity rather failure. Ideally, it is better to establish businesses supported by the government rather than those that gets little acceptance from the government.
Apart from the massive support from the government finances, the Saudi government policies creates positive environment for the operations of educational facilities and training centers in the country. Most of the training facilities and items are charged less tax by the
government as a means of promoting education to its population. According to Metz and Library of Congress (2014), the government only charges profit tax to the learning institutions and training centers registered by private organizations or individuals. In fact, in the first year of establishment the institutions are given tax holidays to allow them picking up in the industry.
Figure 1: Government expenditure summary on Education.
Source: Saudi Arabia Budget Reports (2013)
Public Expenditure on Education for OPEC countries including Kuwait (3.6%), Qatar (3.3%), United Arab Emirates (1.4%), Bahrain (3.7%), Egypt (3.8%) and the leading KSA with 5.8% in the year 2012.
Subsequently, the kingdom of Saudi Arabia culture encourages and promotes acquisition of new knowledge and technical skills that enhances societal development. Even though, Saudi
initially promoted the learning of Arabic language, its population has come to learn about the importance of English language skills and its role in the current society. Based on this, most of the Saudi population is willing and ready to learn elements of English language skills. On the other side, they are quite willing to be equipped with the necessary technological skills required for economic sustainability of the country.
Fortunately enough, the country’s population is also growing at higher rate presenting the new training institutions with new opportunities with growth and development. Harrison (2014) explains that, the increased number of graduates from Riyadh University without the required skills in the job market further boost the chances of establishing new training institutions in the country. Majority of the graduates across the country finds themselves in need of soft skills required by the current job market. Furthermore, they require English language skills for
accurate and proper communication in the new workplace. The English Center expertise is quite relevant to this industry and to Saudi Arabia in general.
2.4.3 Growth and development of training Industry in KSA
From the previous sections, it is quite notable that, the KSA training industry is likely to experience high industrial growth as well as expansion. Market forces and factors indicates that, with the current growth in population will definitely lead to higher demand for soft skills need in the future Saudi Arabia society. As the government expenditure on trainings and educational programs is projected to increase, it is projectable that the training industry shall grow at the same pace. According to Andrew (2015), the Saudi Arabian households are constantly increasing their budget income for training purposes and this has the capacity to further expand this sector by a greater percentage.
According to reports by Marinov (2013), the training industry in Saudi Arabia has the capacity to expand by almost 20% in the next three years. In fact, based on this report, it will be
unreasonable for this industry to experience minimal increase of almost 10%. Ideally, the
potential customer base for the training industry is projected to increase from 10% to almost 26% each year. The demand for qualified teachers and technical professionals is also projected to increase with the growth and development of the KSA economy.
According to Rust et al. (2014), growth and development of other sectors shall have direct impact to the training industry. With level of competition in the Saudi market expected to grow, more companies shall demand more qualified professional skills that enhances success in the market. It seems the industry shall serve a range of customers from various sectors rather than fresh graduates from various universities across the country. The future focus of the industry shall be shifted to correctly blend the workforce with the needed skills for their organizations to meet the high revenue targets and requirements.
Going with the initial reports, over 50,000 local students were registered in KSA universities in 2012 and this number is expected to graduate by 2016 presenting a greater demand for training institutions come next year. Similarly, if the common trend is to hold water then the industry is projected to present more opportunities to various existing training
institutions in the country. Rust et al. (2014) reports that, in 2012 alone, the various training institution registered an increase of 5.1% of the total number of trainees that registered for English language compared to the results of the previous year. The following year, the institutions posted an increase of 10% in the number of trainees registering for the English language skills. This means that the number of trainees registering for English language shall drastically increase with the common growth in both the economy and national development.
Figure 2: Economic growth of best performing countries.
Source: National. Com 2014
2.4.4 Saudi Arabia Trade Policies
Saudi Arabian General Investment Authority (SAGIA) is the national body that is
responsible for proposing and implementing policies regarding international and local investment in the country. The Authority’s major focus is to promote foreign investment in Saudi Arabia as well as promoting local investors to startup businesses in the country. Abu (2014) explains that, the body issues investment licenses, visas, and residence permits amongst other related papers to foreign investors. In addition, SAGIA is responsible for streamlining the foreign investment application processes by creating investor service centers across the country.
According to the country’s trade policy, the body through its centers is required to respond to investment applications within 30 days by either registering the business to startup or reject its application. The body approves almost all applications unless otherwise. Saudi’s tradition is based on free market policy making it easy to establish new startup businesses in the country. According to the trade policy, if SAGIA rejects the application of the international investment the foreign investor is entitled to appeal the rejection.
The Saudi Arabia’s investment environment reflects the environment of liberal, open market and enhanced private enterprise policies. More importantly, there are no restrictions on
foreign exchange and no restrictions on the repatriation of capital and profits. Andrew (2015) explains that, in April 2000, the Saudi Government approved a foreign investment law that encourages establishment of foreign businesses in the country. According to this new investment regulation, the old foreign investment law was reversed. In one hand, the Saudi Arabia’s foreign investment regulation allows international companies the possibility of 100 percent ownership of the projects. In one hand, it allows foreigners to acquire the property required for the project itself. On the other hand, the investment law enables those businesses established by the locals to retain the same incentives given to national companies. For example, most projects that are 100 percent foreign-owned are eligible to loans from the Saudi Industrial Development Fund. This is meant to encourage partnership with the foreigners to establish business and grow the KSA economy.
3.0 Company Profile & Business Strategy
3.1 Company overviewThe English Center USA is an American Multinational organization that provides English language and other soft skills to the trainees and as well to fresh graduate students from universities. The institution offers English as a second language (ESL) to the non-native speakers alongside other skills such as communication skills.
Despite being headquartered in the United States, the organization has branches across most countries in the world. However, in some countries the American English Center exist as a franchise. For instance, the business has operated successful franchise retails in the Ukraine training industry (Edelman et al., 2012). This present the opportunity for investors to operates its chains successful in other countries across the globe. Partnering with the successful multinational giant results in easy management and effective administration training business in newer regions.
The company relies in most language professionals from the mother country that instills the needed English language skills to the trainees. While the branches management is
centralized, franchises are left to use the name and maintain the principles of the organization in their areas of business. KSA English & IT Center is the registered business that shall operate as the franchise entity of the American English Center. The organization shall invest in the KSA training opportunity as a partner or franchise to the Mother American Company.
Based on the need and market niche identified earlier in the other sections of the project, the business shall start with a single center at Riyadh city then expand its branches to KSA other cities and the entire GCC region. This shall be determined by the performance of the center in the earlier growth and expansion basis. Ideally, the top management of the organization will determine the growth and expansion.
3.1.1 Vision of the Center in KSA
Based on the demand and the need of KSA training industry, the vision of the English Center shall be manifested in being an institution committed to life changing opportunities for the trainees of all ages. According to the Center’s culture it is never too late for any individual to learn provided the required skills plays a greater role to the society. More importantly, education and constant trainings is wealth that can be instilled in people to improve and better their lives.
The Center’s Motto is, “Imparting good and basic skills for better societal life”
3.1.2 Mission Statement
The mission of the business shall be to provide a model of high quality English language skills and training to instill the trainees with real life communication skills for a better tomorrow. We shall offer cost-effective, diverse, and challenging training programs to the Kingdom of Saudi Arabia population that matches the current needs of the dynamic job market. The
entire GCC region to equip the growing population with the required soft skills in the current society.
3.1.3 Fundamental Principles
The proposed franchise shall majorly concentrates on offering high-end service products to the entire KSA population. Being a known premium service provider, this shall be maintained even to this franchise-training center. The training services shall just consist of the tailored training services provided by the Mother Company. Operating at all multiple levels, the existing broad client community shall experience high benefit from the established new English Center in the Kingdom of Saudi Arabia. To achieve these high expectations, the following principles shall guide the practice of the organization in KSA;
• The Center at all times shall provide a unique training service with high levels of professionalism to the clients on timely and convenient basis. All state of art-techniques and culturally accepted practices shall be primary focus of all professional instructors. This is meant to enable the business succeed in meeting highly set goals as well as accomplish its first responsibility of meeting customer needs and wants.
• The management of the organization shall at all-time focus on building strong financial environment and background to achieve the multifaceted service provider status that the organization inherits from its mother company. In addition, this is to ensure the English Center remains the most loved institution in the KSA and GCC regional market.
• The customer shall remain the most important person in all the transactions of the business. Based on the philosophy of the organization, all the customers to the training center shall be entitled to professional services that go beyond their expectations in agreed time, at reasonable, competitive and attractive prices.
• The organization shall at all times treat its employees, suppliers, partners and customers with high levels of consideration and fairness regardless of the situation
• Any undertaking shall aim towards bringing value to the organization’s community but more importantly to the client base.
3.2 Business Strategy
3.2.1 Franchise Model
Though not common amongst business organizations, franchising is taking center stage as one of the business models brand in the current society. The word franchise is an Anglo-French word meaning free both used as a noun as well as a verb. The derivative was commonly used to refer to an alternative chain store that distributes goods to the customers by avoiding investments and liability to the main chain. The Franchisor’s enters into contractual agreement with franchisee for the common benefit of both. The main important relationship that occurs in this type of business model is that of exchange of trademark. The franchisee uses the trademark as the main primary input in its line of production. However, the relationship exists in the manner in which the two shares the realized profit by the franchisee though they tend to have greater incentives.
Several theories have been proposed to analyze franchising model in business practice. According to Gleeson (2012), franchising is a business concept that focuses on expanding the initial business base to various locations without affecting or depreciating its brands to the customers. Ideally, franchising is seen to provide the business with the most important resources needed to enhance growth by assisting reach minimum efficient scale of operation through building strong brand image and capital reserves. However, the current franchising model mainly entails exchange of trademark for the business practice and some franchisors also offers finances to their franchisees.
The English Center Franchise Model
Even though, it may work not for other organizations, for us franchising is a working model for our provisions. The organization firmly believes in efficiency, proximity and flexibility to the market by the group of small business. Besides, the Center believes in the energy generated by the many individual entrepreneurs concentrating the market. We are always convinced that stability, efficiency, dedication and initiative incorporated in the franchising network are more productive than that of the larger company. Ideally, our fundamental principles embrace the philosophy of keeping our structures small to remain more competitive and highly motivated in the market.
3.2.1.1 Why Franchising model to KSA training industry
Over the recent past, franchising has experienced rapid growth in Middle East as well as the Gulf region. According to Gibbard (2013), in the last two years, the kingdom of Saudi Arabia alone has experienced annual growth of franchised businesses of 10%. The country has well-established rules regulating franchise agreements. This has made it possible to franchise various businesses in the country and encourage investments in the KSA economy. Borrowing its regulations from the European Franchising Federation’s Code of Ethics, the businesses
franchised remain protected and as profitable as their mother companies. Based on this beautiful franchise culture, it is possible to operate the training center as a franchise successful. The American English Center is a well-established training institution across the globe and this makes it very easy to start the organization in KSA and succeed.
The Kingdom of Saudi Arabia is quite ripe for the franchise opportunity. The country’s business trade and investment policy encourages establishment of foreign investments in the country. In fact, the locals have embraced the culture of teaming up with foreigner to invest in the rapidly growing KSA economy. For instance, Franchise retail chains including Taco Bell,
Burger King, Dunkin Donuts, and McDonalds amongst other international car dealers and car rental franchises have successfully operated their businesses in the country.
Despite the massive success experienced by the franchises in other industry in the KSA, no business organization has ever tried franchising in the field of education and training. With the number of franchises getting boost and growth in the country for the last ten years, it is quite definite franchise in any industry may come out prosperous. The Saudi market experiences constant growth as well as development in the training industry. More importantly, most of the international franchise models have come out successful in the KSA market. Besides, the exclusive agency theory makes it easy to start up and open several branches in each and every sector of the Saudi economy. Arguably, we will build a local company name by having the parent name with us as franchise so if the contract terminated after few years then the client and the potential clients will know us (the local company)
Franchising of this Center to the KSA training industry is not only based on the ability of the market to accommodate the institution but also relies on challenges facing young
organizations. Our organization vitally has very little capital to start-up this business. As such, we project to gain financial assistance from the mother company to ensure all the operations and the business is managed well. Investment in the KSA training industry is a lucrative idea that entails injections of huge chunk of capital in order to realize its potentiality.
According to Rust et al. (2014), the Saudis generally prefer being self-employed and love establishing their own businesses. Based on this, the franchise model actually suits the needs of this society. In fact, the business model adopted may tend to influence the behavior of the customers in this particular industry. Using the strong corporate image of the American English Center partnering with the locals, it will become easy to convince the people to join this training center. To avoid the risk of introducing a new brand in the market, the Saudi people like using
their capital to invest in already outstanding brands in both the international and local market. They are quite relevant franchise business policies as well as the general model. Again, the Saudi governments backup the idea of franchise and joint ventures in the country. With various
initiatives including incentives and subsidies from the government, it is quite easy to franchise in the training industry to provide the locals with the necessary required job market skills.
On one hand, the entire Gulf region imitates the American way of life and in all aspects of business. Due to this, franchising a business of American origin could totally do better in the Kingdom of Saudi Arabia. In fact, the English Center being a franchise of a native English nation, this could increase the chances of market success to this institution in the KSA. More importantly, having an American known brand in Saudi will the brand and will give a competitor advantage. The company will have a good access to native English speaker teachers by having the franchise
.
3.2.1.2 Benefits of Franchising in KSA training Industry
Even though, there are several business models in place to be executed by startup firms, it is critical to consider the most beneficial to the organization. Sudhakara (2013) supports that, effective and appropriate choice of the business model makes the corporation profitable if not successful in the industry. In considering efficiency incentives, capital benefits, and a well-thought management concept, franchise model is the best model to adopt in investing in the rapidly growing KSA training industry. Franchising of the English Center in the country possesses the capacity of improving value of the training services to the highly demanding soft skills Saudi residents. Franchising shall not only benefit the franchisee but also important in increasing value to the entire system. Just through being able to claim the residual profits, the franchisee is definitely encouraged to maximize profits and present the growth value to the franchisor.
Alternatively, franchising shall ensure effective management of the established business in the new destination. Managerial decisions and professionalism borrowing is quite evident in franchising; this allows the business to be managed effectively and efficiently as the mother company. Tan (2012) explains that, even though, the franchisor plays minimal role in monitoring and management of the established business, they provide the franchisee with the necessary managerial skills to ensure success in the branch. This improves and creates a positive
relationship between the businesses thereby making sure the franchisee to maximize their efforts towards maximizing profits.
According to Plafker (2014), operating business as a franchise allows the started businesses to operate as the larger chain. This commercializes the business even though it may belong to an independent businessperson. To tap this broad opportunity in the training industry therefore the business must be ready to operate as a franchise. The training assistance,
independence and international promotion will lead to superior performance in the market. In addition, some benefits will accrue out of franchising based on the decreased cost of operation, less involvement and better investment in training.
The original franchise fee being charged and the ongoing royalties allow the mother company to promote and create awareness of their product to the entire market. Even though, the franchise will be new in the market, it will rely on the marketing campaigns made by the mother company in advertising the brand and support of the product in the marketplace. Smith (2013) explains that, a growing economy needs new techniques in the market place in order to tap the rich potentiality of the economy. Franchising suits the rapidly growing KSA training industry as well as other industries.
According to Bicce (2012), franchisees are exposed to higher chances of success as opposed to creating a new sole proprietorship business. Ideally, it will take a shorter period for
the business to be started and take off immediately. This is based on the massive support that the new business will receive from the ongoing training for its management team. In fact, the mother company shall help the business to find optimal location sites for the franchise revealed by its market research. With the best new models in the market place, the franchise can also share with other franchisees across the globe securing its success in the new market place.
Even though, there are several downfalls of the franchise model in this form of industry, the management shall be ready to tap any changes to ensure success to the organization. In one hand, this shall include price cuts, introduction of new brands that suits the by then needs of the Saudi growing population. On the other hand, the franchise shall utilize a long term contract agreement of almost 10 years to avoid the risks of business failing just in short term.
This franchising opportunity shall help to grow and develop the Saudi economy. Arguably, attracting Foreign Direct Investment (FDI) has the advantage of growing and expanding the economy with a greater percentage. Ambler (2012) explains that, foreign investment and more particularly franchises enhance economic growth in development in the countries. Based on this, the Saudi government has shifted its attention in ensuring successful ventures in the country. Ideally, it provides a wide range of opportunities for new technologies, technical support, management techniques, finance and market access for the production of goods and services. Through the FDI drivers the economy is able to expand and grow.
It is a common knowledge that franchising opportunities such as the one described here will provide abroad range of new skills, technologies, communication skills, finance and market access for the commercialized production of goods and services. According to Bennett (2013), the government of the Kingdom of Saudi Arabia has realized increased GNP growth with the initial franchises established in the country. In fact, the Saudi Arabia’s investment environment reflects the benefits that have been achieved through such investments in the country. Saudi’s
tradition is that of open market that encourages imports and exports to the country. However, it's more significant to note that the franchising model quite suits the KSA training industry.
Even though, our franchise may incur costs following the parent company model, it is notable that, the agreement will entail the parent company only slashing 10% of the profits of the business annually. Based on the strong consumer base achieved by franchising, the profits slash is quite negligible and the business can trade at high profit margins in the market. However, based on the lucrative market franchise opportunity, we are sure the English Center will accept to franchise our business idea. Franchises always fall to viability of the business plans and also the suitability of the management plans that the organization possesses. Arguably, this enables the franchise to follow its parent company business model without technicalities or failure.
3. 2. 1.3 Readiness of KSA for the Franchise and Trade policies
Based on the growing economy of Saudi Arabia, the potentiality of the economy looks rich for successful business models. According to the previous analysis of the training industry, it is quite definite that market is suitable for franchising. Statistics from the Saudi Arabian
Monetary Agency indicates that, the country experiences high incomes with improved purchase power. According to this report, the GDP per capita stands at $14,724, which is higher,
compared to other well performing countries. Half of the 23 million KSA populations are people under age of 15 years old and the majority is ongoing with education programs across the
country. Based on this, opening an international learning institution whether as a franchise or as a multinational can get a definite market boost.
On the other side, reports have it that, almost 27% of the population is an expatriate workforce that are in the need of soft skills to get upper hands in enhancing their careers as well as ensuring successful running of the competing organizations (Metz & Library of Congress,
2014). More fortunately, most of the Saudi workforce is quite familiar with franchising model, this shall make it easy to establish the English center and have it managed well throughout the country. Instead of outsourcing the management team from other countries, the available workforce shall be used to run the franchised center at a lower cost.
Subsequently, the KSA has experienced increased growth in infrastructure and support services. The transport network across the country is fully developed and this support connection of businesses in the region. According to Donnelly (2014), road networks connect all cities in Saudi Arabia, which promotes businesses. Arguably, the effective communication network across the country makes it possible to run various organizations that already exist in the country.
Moreover, the country has well-established networks of various local and international financial institutions. Both the local banks and the international financial bodies are always ready and willing to support the new business being founded in the country. The available capital is readily accessible to all forms of businesses. Since our business may run short of capital in initial establishment, the accessibility of loans will make sure the business runs as projected as well as ensuring expansion.
According to reports to recent reports, the Saudi government is totally committed in encouraging franchises as a means of stabilizing the economy. The government concentrates on encouraging Saudi private sector. It provides the locals with the financial support to start up new businesses and also provides regulations to promote international investment in the country. Smith (2013) noted that the Saudi government established the Saudi Credit Bank with capital base of over $1.6 billion to provide Saudi investors with long-term and short-term loans at low interest rates. This encourages establishment and growth of businesses in the country.
3.2.2 Management Plan
Management plan is important for any business organization. Management planning is an essential part of any new business organization. The franchised American English Center shall fully rely on the management for its operation and administration in KSA. Ideally, the organization shall adopt this management plan to achieve its set objectives.
3.2.2.1 Objectives of the Franchise
The management team shall focus on achieving the following set goal:
I. The company shall start operating by October 2015. The management team is expected to collect the necessary resources to start operating as projected. The economy of Saudi Arabia is growing and establishing this franchise is something that should be initiated as faster as possible.
II. Within two years of existence in the industry, the organization projects to have added additional franchised branch in the country. To mean, the organization must acquire a higher number of trainees to accomplish its expansion agenda in the long run.
III. In five years of practice, the franchise projects to have established several branches across the Kingdom of Saudi Arabia and the entire GCC region.
IV. The business projects to operate a profitable business in the industry despite the competition expected in the training industry.
V. To be the leading training company across GCC region in three years of service
3.2.2.2 Management team
Based on the industry of the company will participate in, the franchise shall employ a team highly qualified English language and IT professionals that will take the training industry to the next level. In order to execute the mission of our business in KSA, the business will start by outsourcing services of American Internationals who are trained on native English language to enable us instill these needed soft skills to the Saudis? The services provided by these
professionals shall be expected to satisfy the requirement of the job place as well as meet the requirement of the Saudi employers.
To be qualified to train on these soft skills the employees will be expected to: i. To hold masters in the native English Language
ii. Possess language skills in Arabian
iii. To train on IT skills one must have a Master’s Degree in Information science or other related technology field
iv. The employee must be registered by the professional bodies in order to get opportunity to work for the organization
All these skills will be required for the professionals who will be hired to train the customers on the soft skills. However, for the leadership of the franchise, the highly motivated Saudis shall be employed to manage the business. This team shall be trained by the experts from our mother company to instill in them the managerial skills of the organization.
For startup, the franchise projects to begin with a smaller base of employees to improve efficiency as well as enhance growth and the development of the business within a short period of time. The managing Director shall be outsourced from our mother company for a period of one year, while the rest of the professionals shall be recruited from the highly competitive Saudi’s who are able to deliver to the organization. Ideally, the franchise shall pride itself on the superior services provided by the organization towards satisfying the needs of the customers. More importantly, there shall be a set of ethics to guide the operations and the franchise activities in the region. The management operations shall be based on creation of positive work
environment that encourages high interaction in our management system. We will continue to develop and leave behind a reputation nothing short of first class through superior management.
4.0 Marketing Plan
4.1 Marketing objectivesIn order to achieve in this positive looming industry, the following shall be the market objectives:
• To acquire abroad customer base and a great number of prospective customers within the first year of the business startup.
• Provide the trainees with a first class service to ensure enhanced financial growth as well as revenue returns to the business.
• To offer premium-training programs that match the customer needs and the general job market wants in the training industry.
• To complete above-expectation and high end services for the home or commercial client on deadline.
• To be a first class English training Center in the Kingdom of Saudi Arabia and the entire GCC region.
4.2 Target Markets and Segments
For any organization to startup and turn out successful then it must have abroad base of targeted customers. Kurtz (2014) argues that, the target market and segments gives the
organization direction on where to focus. Before implementing any marketing strategy, the business must focus on a specific market in order to create the difference. It is quite evident that, the training industry has a broad base of customers that the franchised English Center must focus on in order to turn out successful. As such, our business shall focus on both the primary and secondary target markets.
The Demographic target Market
Demographic target markets entail targeting the specific population with whatever product that they need. According to Solomon (2013), demographics play a great role when it comes to marketing and focus on market segments. Even though, demographic segmentation can be considered to be quite common to various business markets, demographic market
segmentation is a significant parameter in formulating marketing strategy. It plays a crucial role as a strategy in an intense competitive market. Ideally, it enables the organization to simply integrate the broad target population into smaller segments with specific traits that can be satisfied with the introduced product in the market. The division is based on age, gender, race, income, education, occupation, and marital status. Arguably, the English Center franchise shall focus on all these to compete fairly with the already existing organizations in the training industry. Marinov (2013) argues that, when all these traits are reflected on the market segments the larger market is covered. In the telecommunication industry the consumers can be divided using such traits, however, the business entities can be divided based on the line of products that they deal in.
Definitely, with the extracted information from the Saudi Census Bureau, the franchised center shall concentrate on demographic segmentation to provide the entire Saudi Arabian training industry with what the clients wants. The business shall establish its branches on the highly populated cities starting with Riyadh. Abu (2014) explains that, the Riyadh city is highly populated and every year experience an influx number of graduates from the university. This is not only the over populated city in Saudi Arabia, other highly populated regions shall also be served with the center. Based on the importance of the demographic information, the franchise shall constantly review its target plans to shift to more achievable demographical segments.
Procedurally, based on age, the company shall focus on those aged between 15 and 30 years. According to Bosik (2012) survey, majority of the Saudi population is that of below thirty and the government is more interested in their training on soft skills. This makes it a good target market for our franchise. In addition, most companies also targets to recruit people of this age since they believe that they are highly productive. In fact, according to the training market analysis, this group makes the largest population who are looking for the relevant skills to join the job industry. As such, they will be our primary target market when it comes to demographic segmentation.
Besides, our business will target other business organizations that are looking for places to train their employees on soft skills. According to Andrew (2015), most Saudi business corporations are looking for partners to develop their employee skills as well as ensure their organizational advancement through technological skills acquisition. With our highly leveraged English and IT skills product, we better ahead to serve these companies in the entire GCC region including the Kingdom of Saudi Arabia.
Psychographic Segment
Despite primarily targeting the demographic market, it is also important for our business to target the psychographic markets. Arguably, the Saudi customer market is highly influenced by the psychographics of its population. Ideally, they purchase decision highly influenced by the perceptions and attitudes they have towards the companies. Perceptions and attitudes of the customers in the training industry are influenced by the ease through which the job market accepts people, who graduate out the training centers. Actually, being a franchise alone makes it look as if we are targeted the Saudi Psychographic market.
Being a franchisee of American English Centre, the organization targets to register people or students who highly values international organizations for their services and products. Our emphasis shall be to improve the quality of our certificate and make it too relevant in the global market. The organization shall use the logo and the all the branding image of our mother company to actually satisfy this perceived tendency of the KSA market. This will make it easy to get a great population at our first center and other branches across the country. The company services alone shall motivate the customers to highly encourage others to join our training institution.
Our organization shall designs most of the training products based on the influence of the consumer purchase decisions. Based on the Saudi’s love for value of their money, the Center shall target those who are very sensitive about prices and the pricing strategy of the
organizations. We will from time to time review the prices of training programs to suit what the consumer’s need from the training industry. The line brand shall be designed in such a way that all the graduates from the center will highly be valued just other professionals from international bodies.
Geographic market Segment
Geographic market segment is the division of market segments into geographic units that ensures the products suits the behavior of all the geographic targets. According to Smith (2013), this may include states, countries, region, neighborhoods and counties. This is quite important to our business based on the opportunities identified in the entire GCC region. Based on this, our center shall focus customer from different regions of the KSA. First, the center shall target the students from different cities, towns and rural areas that highly need the soft skills in their daily activities.
In fact, as projected earlier, the business shall establish different branches in the country to attract customers from different areas of the KSA.
More importantly, our training center targets those who live in the entire KSA and GCC region. Again, we also project to expand the business to provide the necessary soft skills to the entire MENA region. The economies of the countries in this region experiences higher growth rates and targeting their population can highly bear fruits to our training center.
Behavioral market Segment
Tan (2012) explains that, marketing segmentation entails a lot of perspectives that has to be managed to realize the overall marketing objective of the organization. Behavioral market segment refers to that market division that is based on the attitude, use, knowledge and the response of the product and service to the consumers. In regard to this, our business shall focus on expanding our brands to cater for the needs of behavioral customers. More specifically, those attracted by the quality of services of an organization shall be our major targets.
4.3 Position Strategy
It is quite important for any form of business to position itself well in the market. This can be done through formulating a strong statement that if not suitable for ensuring
organization’s success then it’s beautiful enough to attract clients to the organization. Franchise Positioning Statement
The company’s positioning statement is a clear and attractive customer. In fact, it is a luring strategy that boosts our organization’s image in the market. The American English Center is a focused organization that offers soft skills in the highly competitive market to ensure the current needs of the job market are met. With Saudi population obsessed with the need of English and IT skills in the current competitive job market, the organizations aim is to provide a classic training on all these needed skills by the several organizations. Our choice for this
attractive statement is based on our market focus in the currently competitive Saudi Arabian environment. Arguably, it shall strategically help us to attract the broader market as well as gain the competitive edge against the other competitors in the training industry.
4.4 Market Entry Strategies
Any new business in the market place or industry must always enshrine on how it will make entry into the market. Actually, all the industry is competitive and as such they must be unique to startup and pick immediately. The Franchise shall adopt the following market entry strategies to ensure it pick up immediately it made the entry into the training industry:
4.4.1 Green Investment
Despite being lucrative, training industry in the kingdom of Saudi Arabia is as well competitive. To achieve in the industry our organization shall be unique by making entry into the industry with green investment initiative. Our organization shall not use any product that does not only pollute the environment but those that have limited impact on the environment. Our centers shall be green in structures and also green in all its systems and technology. This is expected to boost the image of the company as well as attract more customers. The sole purpose of any business is to have as many customers as possible. However, it is important to note that, the 21st century clients are quite sensitive about their surrounding and conservation of
environment. Any organization that implements this in the market place then has what it takes to serve the customers.
Even though, this is a good market entry strategy into the various segments of the market, it may also have disadvantages to our business. First, the green investment strategy is not easy to implement and it may our organization time to implement. Next, the green investment is quite expensive to implement increasing cost of doing business, which may finally have impact on the business returns. Though it has the capability of increasing consumer base, it may spontaneously
reduce the profitability of the business in the long. Sincerely, green investment is quite irrelevant to the training industry, though may be implemented to attract customers it may have no impact in influencing customer purchase behavior. Wilson (2014) explains that, the customers can find it hard to distinguish it with the product being offered. It is best applied in products that the customers can easily see it importance in implementing the brand being offered by the organization.
4.4.2 Joint Ventures
Training industry has impact on various business as well as the sectors in the economy. In fact, it is a primary booster to the organizations to improve on their management as well as ensure success to the organization. Based on the fact that, our franchise will trade in this industry, it is more significant to make market entry through joint ventures. According to Gleeson (2012), most companies in the KSA would mind partnering with training institutions to make them easily train their employees on the basic as well as the newly required skills at the job place.
Ideally, our organization will enter joint ventures with both the local and international corporations that already exist in the country to do the training programs for their employees. This will boost our customer base as well as well create high revenue returns to the organization. Essentially, the cost of doing business shall be reduced with a broader base of customers served with our products.
Even though, joint venture might be appropriate market entry strategy into this industry, it may have negative impacts on our business. According to Ambler (2012), one partner in the joint venture may potentially exploit the other in the name of doing business together. For instance, our company will be focused in getting huge number of trainees from the business organizations. However, the corporate partners or organizations may override the prices being
