D E F I N I N G P O T E N T I A L S O F O P E N I N G A M A T C H A G R E E N T E A H O U S E
T H E S I S
P R E P A R E D B Y S A M I E R J A N M A H O M E D
0 8 7 0 9 9 2
F I N A N C E & A C C O U N T I N G
R O T T E R D A M B U S I N E S S S C H O O L
J U L Y 3 , 2 0 1 3
C O N T E N T S
Executive summary ... 5
1.0 Introduction ... 6
2.0 Theoretical framework ... 8
2.1 Company profile ...8
Legal form ... 8
Company structure ... 9
Company operations... 10
2.2 Strategic analysis/plan ... 10
Strategy formulation ... 11
Strategic plan ... 12
2.3 Marketing plan ... 13
Marketing mix ... 14
2.4 Financial plan ... 15
2.5 Summary ... 16
2.6 Answer to theoretical research questions ... 17
3.0 Methodology ... 18
3.1 Research method ... 18
3.2 Data collection method ... 18
3.3 Data analysis procedure ... 18
3.4 reliability and validaty ... 19
4.0 Findings/Empirical framework ... 19
4.1 Company profile ... 20
Mission, vision, & objectives... 20
Legal form ... 21
Operations ... 21
Company structure ... 22
4.2 Environmental analysis ... 23
4.2.1 PESTEL analysis ... 23
Political factors ... 24
Economic factors ... 24
Social/demographic factors ... 26
Technological factors ... 28
Environmental factors ... 28
Legal factors ... 29
4.2.2 Industry analysis ... 29
The threat of new entrants ... 30
The threat of substitute products and services ... 30
The intensity of competitive rivalry ... 30
Industry life cycle ... 30
4.2.3 Market analysis ... 31
The tea and coffee market in the Netherlands ... 31
4.3 Competitive environment ... 40
4.3.1Competitor analysis ... 40
Sarah Lee & Coffee Company ... 40
Starbucks ... 41
Kaldi ... 42
4.4 Research on viability ... 42
4.4.1 Strategic factor analysis summary ... 42
Internal factor analysis summary (IFAS) ... 43
External factor analysis summary (EFAS) ... 44
Strategic factor analysis summary (SFAS) ... 45
SFAS conclusion ... 46
4.4.2 Strategic plan ... 47
Market positioning ... 47
Competitive advantage ... 47
Brand strategy ... 48
Porter’s generic strategies ... 48
4.4.3 Marketing plan ... 49
Segmentation ... 49
Marketing mix ... 49
... 52
4.4.4 Financial plan... 55
Statement of financial needs ... 55
Sources of Funding ... 56
Sales projections ... 56
Income statement ... 57
Cash budget ... 57
Balance sheet ... 58
4.5 Summary ... 58
4.6 Answer to empirical research questions ... 60
5.0 Discussion ... 62
6.0 Conclusion & recommendation ... 63
Bibliography ... 65
Appendix ... 67
Financial appendices ... 67
Research proposal ... 76
L I S T O F I L L U S T R AT I O N S
Figure 1: Three levels of a product ________________________________________________________ 14 Figure 2: Organizational structure of one restaurant __________________________________________ 22 Figure 3: Organizational structure of multiple restaurants _____________________________________ 23 Figure 4: Macroeconomic indicators Netherlands ____________________________________________ 24 Figure 5: General social data of the Netherlands _____________________________________________ 26 Figure 6: Age structure Netherlands 2013 __________________________________________________ 27 Figure 7: Netherlands population density ___________________________________________________ 27 Figure 8: Consumption of beverages in 2012 ________________________________________________ 32 Figure 9: European coffee consumption per capita in 2010 _____________________________________ 33 Figure 10: Historical tea consumption in the Netherlands ______________________________________ 34 Figure 11: Market share types of tea in 2012 ________________________________________________ 35 Figure 12: Historical coffee consumption in the Netherlands ___________________________________ 36 Figure 13: Types of coffee purchased in 2012 ________________________________________________ 37 Figure 14: Coffee corners in the Netherlands according to BHC _________________________________ 39 Figure 15: Porters Generic Strategies ______________________________________________________ 48 Figure 16: Roasted green tea beverages ____________________________________________________ 50 Figure 19: Red bean beverages ___________________________________________________________ 50 Figure 17: Green tea beverages ___________________________________________________________ 50 Figure 18: Coffee & juice beverages _______________________________________________________ 50 Figure 20: Ice cream sweets _____________________________________________________________ 51 Figure 21: Parfaits sweets _______________________________________________________________ 51 Figure 22: Crepes ______________________________________________________________________ 51 Figure 23: Pricing Strategies Matrix _______________________________________________________ 52 Figure 24: Nieuwe Haagse Passage _______________________________________________________ 53 Figure 25: Map Den Haag _______________________________________________________________ 54
EXECUTI VE S UMM A RY
My name is Samier Janmahomed, and as part of my graduation, I am writing a master thesis. I have always been interested in business and finance. During high school, I decided to pursue my career into business, and proceeded to study International Business and Management Studies (IBMS), at The Hague University. From this course I learned all aspects of international business ranging from marketing to human resources, logistics, finance, and accounting. In the third year a decision had to be made to specialize in either marketing or finance. I chose finance, and after graduating, continued to pursue my master’s degree in finance and accounting. This is where I am now.
For the future, my goal is to start my own company, as I want to be independent and making my own decisions. I also want my thesis to be useful to me, something which I could use in the future.
As an aspiring entrepreneur, I am constantly looking for opportunities to start a business. When I visited Singapore, I came across a nice tea bar, selling food and beverages made with green tea. As I enjoyed the experience, I noticed that this type of tea/coffee bar is still absent in the Netherlands.
This made me seriously consider the possibility to open a green tea/coffee bar in this country, which is the topic of my thesis.
The objective of this thesis is “To make recommendations of the potential of a green tea startup, by making an analysis of the current internal and external environment, using strategic- analysis and planning, and financial planning theories.”
The focus here is the viability of opening this company in the Netherlands. To do this, I will analyze the company’s internal and external environment. The internal analysis is related to the company itself, whereas the external analysis is about the country, industry, and competitors.
Taking note of the objective of this thesis, the central research question of this thesis is:
“What is the viability of opening a successful green tea bar company in the Netherlands in 2014?”
Anna’s green tea
1.0 INTRODUCTI O N
The company I would like to establish is called “Anna’s green tea”, or (AGT). AGT is a modern Japanese style tea bar, which offers food and beverages based on Matcha green tea.
Matcha is a fine powder green tea that originates from Japan. The tea has been used for hundreds of years in Japanese tea ceremonies, but now has become more popular and used for drinking as tea or as an ingredient for all types of foods.
Coffee and tea is deeply rooted into Dutch culture and history. Centuries ago, Dutch merchants brought coffee and tea with them from exotic regions. Through the years, coffee and tea have become an important part in the daily lives of the Dutch people. As society is changing, so is the demand for certain types of products and services. Dutch society is becoming more Americanized, and slowly becoming a “to-go” country. Changes in society bring new opportunities, which are currently happening in the coffee and tea branch. Starbucks-like formulas are opening up everywhere, and gaining much popularity. In Asia however, there is much more of a tea culture.
Looking at the tea market, green tea is slowly gaining popularity among tea consumers. Consumers are starting to realize the health benefits of this type of tea, and as many people are looking to adopt a healthy lifestyle, Anna’s green tea wants to capitalize on this by mainly providing beverages with green tea as its main ingredient. Using green tea and Japanese culture as its competitive advantage, AGT wants to know if there is potential for such a formula in the Netherlands.
The structure of this thesis is as following:
2.0 Theoretical framework: Is the theoretical part of this research. It includes literature and theories needed to answer the theoretical research questions. The sub chapters of the theoretical framework include:
2.1: Company profile: Provides theories on a company’s legal form, the organizational structure, and operations.
2.2: Strategic analysis/plan: Provides theories on how to analyze the business and its environment, and how to develop a strategy.
2.3: Marketing plan: Contains marketing theories needed to create a successful marketing strategy.
2.4: Financial plan: Provides theories on the financial statements that are needed in this financial plan. Includes the statement of financial needs, and the pro forma statements.
3.0 Methodology: Includes all the elements of the research process. These elements are:
3.1: Research method: Here I explain the method of research I will use for this thesis and the reasoning why I chose that specific research method.
3.2: Data collection method: Explains which method(s) of data collection will be used in this
3.3: Data analysis procedure: Explains which data analysis method will be used in this thesis.
3.4: Reliability and validity: Describes the reliability and validity of the information gathered.
4.0 Findings/Empirical framework: Includes all the findings of the research carried out which is based on the framework derived from the theory. In this case, the findings are grouped in three main elements: The company profile, the competitive environment, and the research on viability.
4.1: Company profile: Basic information about the company’s legal form, the organizational structure, and operations.
4.2: Environmental analysis: External analysis which includes the PEST analysis, industry analysis, and market analysis.
4.3: Competitive environment: Includes a competitor analysis of the company’s three main competitors.
4.4: Research on viability: Consists of the strategic factor analysis summary, strategic plan, marketing plan, and a financial plan, to look at the viability of the company.
5.0 Discussion: Includes a discussion of the findings related to the actual problem.
6.0 Conclusions/Recommendations: Based on the outcome of all previous sections, a conclusion will be made. Finally recommendations will be given about the viability of this company startup.
The research questions of this thesis are as following:
Central research question
What is the viability of opening a successful green tea bar company in the Netherlands in 2014?
Theoretical research questions
1. What are the various external factors of strategic management that affect a company?
2. What strategic management methods are needed to determine a company’s internal strengths and weaknesses?
3. What are the essential elements of a company profile?
4. What financial planning tools are needed to assess the financial viability of a company?
Empirical research questions 1. What is the company’s current organizational structure?
2. What are the latest and historical consumption trends of the tea and coffee industry?
3. What factors caused the success of the tea/coffee bar branch in the Netherlands?
4. How is the current Dutch economic and political situation?
5. Who are AGT’s biggest competitors, and what are their strengths and weaknesses currently?
6. What is AGT’s competitive advantage, and what strategy will it implement in the future?
7. What is AGT’s financial projection of the coming of 2014-2016?
8. Based on the company’s internal-, and external analysis, and its chosen strategy, what recommendations can be made about the company’s future?
2.0 THE O RETIC AL F R A MEWOR K
The theoretical framework discusses the theory needed to answer the research questions. The framework consists out of four parts. These parts are the essential elements needed for this research.
Chapter 2.1 Company profile discusses theories about basic information of the company itself. These are the different types of legal forms, theories about the importance and creating of an organizational structure, and finally theory about company operations. After the company profile, the strategic analysis/plan will be discussed in chapter 2.2. This chapter is about the analysis of the external environment and the formulation of a suitable strategy based on the analysis. After that, the marketing plan will be discussed in chapter 2.3. This chapter is comprised of the necessary tools and theories needed to create a marketing plan. Finally in chapter 2.4 the financial plan will be discussed.
This chapter shows the essential elements of a financial plan.
Each of these elements will be discussed using relevant literature, which will then come back in the empirical framework of this thesis.
2.1 COMPANY PROFILE
The company profile contains fundamental information regarding the organization. This includes legal form, company structure, and operations.
LEGAL FORM
“In preparing to conduct business activities in the Netherlands, a company is presented with several choices of how to go about it as well as the legal requirements to be complied with. From a legal and tax point of view, the first priority is deciding on which legal form to use to “house” the proposed Dutch-based activities.”1
The legal framework in the Netherlands is quite open and liberal compared to other countries in the European Union, which makes it easier for foreigners to conduct business. There are no special requirements or restrictions, which makes business here attractive.
The basic legal forms in the Netherlands are:
Sole proprietorship: A sole trader is a one-man owned company. The one person who owns the company is personally liable for business obligations.
Partnership: A partnership is a co-owned company by two or more partners. These partners are then liable for business obligations.
General Partnership (VOF): A VOF is a business which is operated by more than one person. This is done suing partnership agreements, which determine each partner’s contribution in the company, liability, and entitlement. All partners are jointly, but also personally liable for business obligations.
Limited Partnership (CV): A CV is a limited partnership which is operated by more than one person, but with this legal form, there are certain types of partners. There are active and silent partners. The silent partner is usually the person who backs the sole proprietor financially. Therefore, the silent
1 Ibpus (2012). Netherlands Business Law Handbook: Strategic Information and Laws. United States:
partner is only liable for the investment he or she made in the company. The active partner is then allowed to make decisions based on day to day activities. With this kind of partnership, the active partner is personally liable for business obligations. Furthermore there are some differences in tax.
The active partner is considered a sole proprietorship and thus has to pay income tax on its share of profits, which is not the case for the silent partner.
Private Limited Liability Company (BV): A BV is a private limited liability company, which is considered a legal entity on itself, meaning that the owners are not personally liable for business obligations, which limits the owners’ risk. The paid in capital required to start a BV in the Netherlands is €18000. It is important to know that shareholders are only liable for their own cash invested in the company. When a shareholder owns more than five percent of shares, he or she becomes a substantial interest and thus has becomes liable for taxes on capital gains or dividends paid.
Public Limited Liability Corporation (NV): An NV is a corporation and owned by shareholders whereby shares are publicly traded on the stock market. An NV can only be created when it has at least €45000 paid in capital.
Besides these legal forms, there are several other legal forms such as a Foundation (Stichting), an Association (Vereniging), Cooperation (Cooperatie), and a Freelancer (ZZP). These legal forms are not really applicable for this thesis, so will not be explained thoroughly.
COMPANY STRUCTURE
The company structure, better known as organizational structure of a company “defines the scope of acceptable behavior within an organization, its lines of authority and accountability, and to some extent the organization’s relationship with its external environment”2. On a deeper level, organizational structure describes responsibilities and tasks of jobs. These can vary depending on the size of a company. An organizational structure of a large corporation is much more complex compared to that of a small business. Yet it is also important for small businesses to implement an efficient organizational structure because this will help making the business to reach its maximum potential in terms of productivity, efficiency, flexibility, and motivation. One must recognize that this might be a difficult task if the company is not operating yet. Often, the structure is created when a business already has been established.
As this thesis is about a small business, the following factors should be taken into consideration when creating an organizational structure.
“Relative strengths and weaknesses of various organizational forms.
Legal advantages and disadvantages of organizational structure options.
Advantages and drawbacks of departmentalization options.
Likely growth patterns of the company.
Reporting relationships that are currently in place.
2 Inc.com. (2013). Organizational Structure. Available:
http://www.inc.com/encyclopedia/organizational-structure.html. Last accessed 25th June 2013.
Reporting and authority relationships that you hope will be implemented in the future.
Optimum ratios of supervisors/managers to subordinates.
Suitable level of autonomy/empowerment to be granted to employees at various levels of the organization.
Structures that will produce greatest worker satisfaction.
Structures that will produce optimum operational efficiency.”3 COMPANY OPERATIONS
Company operations are what a company does to create value. To be more specific, what a company does with its assets to create value. These assets owned by the company can be both tangible and/or intangible assets.
Virender, S. states: “business operations encompass three fundamental management imperatives that collectively aim to maximize the value harvested from business assets, also known as "sweating the assets".
These are:
1: Generate recurring income
2: Increase the value of the business assets 3: secure the income and value of the business
Note that these three imperatives are mutually dependent on each other.”4
2.2 STRATEGIC ANALYSIS/PLAN
Strategic analysis and planning is part of strategic management, which can be identified as “the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.
The term strategic management is used synonymously with strategic planning.
The purpose of strategic management is to exploit and create new and different opportunities for tomorrow while long-range planning tries to optimize for tomorrow the trends of today.”5
What are the benefits of strategic management? The main benefit of strategic management is to help organizations to formulate better strategies. This is done by using a systematic approach to strategic decisions. It is very important that everything is communicated well, because through
3 Hillstrom, K (2002). Encyclopedia of Small Business. United States: Gale group
4 Poonia, S (2010). Production and Operations Management. Delhi: Gennext Publication. p32.
communication, you are able to achieve the commitment to change and implement a strategy, which will have great benefit to the company.
There are three stages of strategic management. These are: Strategy formulation, strategy implementation, and lastly, strategy evaluation.
Strategy formulation: Includes basic goal setting information. What is the company’s vision and mission? What are the company’s (long term) objectives? It is also about identifying the company’s strength, weaknesses, opportunities, and threats. Based on this information, a strategy, or multiple strategies are created, while looking not only internally, but also at the external environment.
Eventually one strategy has to be chosen to implement.
Strategy implementation: In order for a strategy to be implemented successfully, it is required that the firms short term objectives are aligned in such a way that the formulated strategy can be executed. Besides short-term objectives, other important elements are the company’s policies. If a company has policies that are not in line with the formulated strategy, it will be impossible for the company to implement the strategy successfully. Also, it is important that the company adopts a company culture that promotes goals and objectives needed to implement its formulated strategy.
Motivated employees are also important for this, because usually people are against change. If company employees are open for change, implementation of a (new) strategy will go much smoother.
Besides the elements just mentioned, there are many other elements such as, the correct way of allocating resources, the right marketing strategy, the right organizational structure, and the utilization of information systems.
Strategy evaluation: Strategy evaluation is the last stage, whereby measurements are conducted to see how the company is performing. This is done by reviewing the internal and external factors of the formulated strategy. When measurements have been conducted and evaluated, corrective action should be taken.
It is important to realize that because for this thesis, the company is a startup, it will not be possible to implement, and evaluate the business. Therefore only the strategy will be formulated.
STRATEGY FORMULATION
Vision, mission, and objective statements
(David, R. 2012), describes the vision, mission, and objective as following:
1. “Vision statements answer the question: “What do we want to become?”
2. Mission statements are “enduring statements of purpose that distinguish one business from other similar firms. A mission statement identifies the scope of a firm’s operations in product and market terms.” It addresses the basic question that faces all strategists:
“What is our business?” It should include the values and priorities of an organization.
3. Objectives can be identified as specific results that an organization seeks to achieve in pursuing its basic mission. Objectives are long term, which means more than one year.
They state direction, aid in evaluation, create synergy, reveal priorities, focus coordination, and provide a basis for effective planning, organizing, motivating and
controlling activities. Lastly, objectives should be challenging, measurable, consistent, reasonable, and clear.”6
Strategic analysis
Part of the strategy formulation entails to analyze the internal and external environment. To be more specific: The internal strengths and weaknesses of the company, and the external opportunities and threats.
Internal strengths and weaknesses: These are the controllable elements of a company that are either performed positively or negatively. The identification of a company’s strengths and weaknesses are a necessity and can be determined by comparing its performance with the industry, or by
comparing it to itself. When comparing to itself performance is measured by comparing by the goals the company has set for itself combined with what is important to the company (weights).
External opportunities and threats: external opportunities and threats are the external factors that could affect the company in either a negative or positive way. These factors are: Political, economic, social, technological, environmental, legal, and cultural factors. In contrast to the internal strengths and weaknesses, this is not controllable by the company. Therefore, strategic management is about creating a suitable strategy that reaps advantage of the external opportunities while at the same time reduces the threats the company may face.
There are several tools to determine a company’s internal strengths and weaknesses and its external opportunities and threats. First of all, the Dutch market will be analyzed. After that, the PESTEL analysis will be conducted to analyze the external environment. I will also analyze the industry using Porter’s five forces, to determine the industry’s profitability and attractiveness. Also, the strategic factor analysis summary model will be used to analyze the internal and external environment using weights and ratings to see where the company stands.
A competitor analysis will be made as well, to see how the competition stands in the Netherlands. To do this, I will select three of the main competitors, and use the SWOT analysis, and Porter’s generic strategies.
STRATEGIC PLAN
After this, the strategic plan can be formulated. The strategic plan is composed of a comprehensive business strategy where I focus merely on the business. This can only be done when all the necessary information is collected. Key terms in the strategic plan are: Market positioning, competitive
advantage and the company’s brand strategy
Market positioning: Market positioning is described as “how you want your customers to perceive your product or service in relation to their perception of your competitors and what marketing strategies you should adopt to reach this perceptual goal. In other words, what message about your product or service is your company trying to put across? And how will you do that? A market position will happen whether or not you are proactive, reactive or passive about the on-going process of developing and sustaining a market position. However, you can positively influence these
perceptions by developing and implementing deliberate market positioning strategies.
When developing a market position you need to select the most persuasive, meaningful and unique points of difference that will allow you to compete for the largest number of potential customers.
Developing a positioning strategy depends largely on how competitors position themselves. Some companies develop a 'me too' strategy and position themselves close to their competitors so prospects can make a direct comparison when they purchase. Other companies develop marketing strategies which position them well away from their competitors. Offering a benefit which is superior depends on the marketing mix strategy the company adopts. Your pricing strategy must reflect the benefit offered and your promotion strategy must clearly communicate this benefit.” 7
In short, it is all about what you as a company wants customers to think about the company.
Competitive advantage: A competitive advantage can be defined as something the company does exceptionally well, that sets itself apart from its competitors. A company cannot survive in the long- term if it does not have a sustainable competitive advantage. To sustain a competitive advantage, a company has to be able to change and adapt quickly to changes in the external environment.
Brand strategy: Why is building a brand strategy so important? It is all about creating a perception.
When a company has a strong brand, it has certain values it portrays to the outside world. People will then identify themselves with these values, which creates brand loyalty. Thus brands are able to influence customers.
A good definition about what brand strategy is about:
“In building brand value “perception is more important than reality” (Duncan and Moriarty. 1998), and as brands only exist in the minds of customers then the management of brands is all about the management of perceptions. The power of a brand to influence perceptions can transform the experience of using the product. In a double-blind trial, patients taking a branded analgesic perceived it to be more effective in treating pain than a chemically identical unbranded analgesic (Branthwaite and Cooper, 1981). In order to manage brands strategically we need to understand how perceptions are organized, how they influence behavior and how a brand can compete in the battle of
“mindspace” (Corstjens and Corstjens, 1995).”8
2.3 MARKETING PLAN
Marketing is an essential element to the success of any type of business. Marketing is the tool by which companies are able to create value for its customers. This is done by catering to the needs of the customer. So companies must differentiate themselves by the customer benefit their products or services provide. As companies have created value for their customers, they now want to capitalize on this. To remain successful, companies must find u sustainable way of keeping its practice of creating value for their customers and capitalizing on the value created. A marketing strategy is exactly this. Finding sustainable ways to create value and capitalize on this in the long-run.
In order to create a successful marketing strategy, it is essential that the target market is identified.
Everything revolves around the customer. This process is known as segmentation. Markets can be segmented in several ways. These are demography, geography and lifestyle.
7 Boldhorizon. (2013). Market Positioning. Available: http://www.boldhorizon.co.nz/market- positioning.php. Last accessed 26th June 2013.
8 Elliot, R (2007). Strategic Brand Management. New York: Oxford University Press. p4.
When the target customer is identified, it is then possible for the company to figure out their needs. And based on that, the marketing strategy can be formulated.
There are several tools that can help to create a marketing plan/strategy. This thesis will make use of the marketing mix to create a marketing strategy.
MARKETING MIX
There are many topics related to marketing. Think about pricing, branding, distribution channels, advertising, and packaging to name a few. This can all be categorized into the four p’s. These are product, price, place, and promotion.
Product: The product of a company is the good that satisfies customer needs. This can be a physical (core) product, but also a service, depending on the type of company. However the product is more than that, as can be seen in the figure below
Figure 1: Three levels of a product
To explain the figure above, let’s use a car as an example.
The core product is the car itself and the transportation benefit. The actual product is the style of the car, the quality level, features of the car, and branding. The Augmented product is about the intangible benefits. Think about after sales service and warranty.
Price: The price is what a customer is paying for the company’s products (or services). Pricing is essential for a company’s success as it needs to cover its cost, and of course the price determines what profit the company will make. However it is much more than that. The price determines the demand of the product. Depending on what product you offer, and the price elasticity of that product. Price elasticity means, how much demand will change to a change in price. Price elasticity for medicine is very low, but for food it’s higher, as there are many substitute products. Finally, the last important element in pricing is the perceived value the customer has. Pricing is the most important factor that influences the value of products and the company itself. There are various pricing strategies that one can adopt in order to create a certain image, but also capture more market share.
Augmented product
Actual product
Core product
Place: The place of a product is firstly, about the location of the business. The location has to be chosen strategically, depending on what type of business you have. For a restaurant business, you want to find a place where your target group can easily access your restaurant. Besides physical location, it is also about distribution channels (if you sell products). For this there are many distribution strategies that can be used.
Promotion: Promotion is all about the communication between the company and its target group.
Think about advertising, events, packaging etc. Silk, A. author of “What is marketing?”9 describes a useful tool to create an effective promotion strategy using the six M’s model.
1. “Market: To whom is the communication to be addressed?
2. Mission: What is the objective of the communication?
3. Message: What are the specific points to be communicated?
4. Media: Which vehicles will be used to convey the message?
5. Money: How much will be spent in the effort?
6. Measurement: How will the impact be assessed after the campaign?”
Silk also describes the usefulness of advertising in media. First of all it is very effective when you want to create awareness of a new product. The reason for this is that it is easy to reach many potential customers using media. It is also useful to describe features of a product. When looking at advertisements on television, you see plenty commercials where features are mentioned.
Furthermore, advertising in media is effective to distinguish the product from competitors. Why is your product better? Why should you buy our product? Lastly, one of the most important reasons is that it is very useful to improve the company’s brand image. Companies that are perceived as a
“premium” brand often use models and give the impressions of “success” in their advertisements.
2.4 FINANCIAL PLAN
The last part of the business plan is the financial plan. The financial plan is everything of the business plan translated into quantities. Everything stated in the strategic and marketing plan is used in the financial plan, and therefore this can only be done once the strategic and marketing plan has been finished.
Financial statements are used portray finances that occurred in the past, present, and future. Because this is a startup company, I am not able to showcase past performance.
The statements that will be used in the financial plan are the following as described by Linda Pinson, author of “Anatomy of a Business Plan”10:
Statement of financial needs: This statement shows how much funding is needed to start the company. It also shows how the money needed will be spent.
9 Silk, A (2006). What is Marketing. United States: Harvard Business School Publishing Corporation.
10 Linda, P (2008). Anatomy of a Business Plan. 7th ed. Tustin: Out of Your Mind... and Into the Market place. p83.
Pro forma Statements: The pro forma statements include a cash budget statement, a three year income statement, and a balance sheet.
1. Cash budget: “The cash budget is a financial document that projects what your business plan means in terms of dollars. A cash flow statement is the same as a budget. It is a pro forma (or projected) statement used for internal planning and estimates how much money will flow into and out of a business during a designated period of time, usually the coming tax year. Your profit at the end of the year will depend on the proper balance between cash inflow and outflow.” 11
2. Income statement: A pro forma income statement shows the projections of the coming year(s). This is done by using the total revenue and expenses of the first year as a base, and depending on the economic outlook, future projections will be made.
3. Balance sheet: The pro forma balance sheet shows the projections of the company’s assets, liabilities, and equity at the end of the first fiscal year. It is a snapshot of a company at a certain point in time.
2.5 SUMMARY
The theoretical framework outlines the body of this thesis, which the empirical framework will be built on. In order to measure a company’s viability, information about the internal and external environment of the company is required.
The basic legal forms are examined. A sole proprietorship is a business operation owned and managed by an individual. Establishing this form of business is simple, but one must be aware that the owner is personally liable for business obligations. Partnerships are operated by more than one person. There are different types of partnerships where owners can be fully or partially liable for business obligations. Then there limited liability companies where the company is a private entity on its own, and therefore owners are not fully liable for business obligations.
Company structures and operations are examined. The company structure of a company defines the lines of authority within a company. It describes responsibilities and the tasks of jobs. Organizational structures vary based on the type of business and the size of the company. A suitable organizational structure is of utmost importance in order for the company to reach its maximum potential when it comes to productivity, efficiency, flexibility, and motivation. Company operations are in essence what it does to create value. Three imperatives that achieve this goal are the generation of recurring income, the increase of value of business assets, and securing the income and value of the business.
Strategic analysis and planning tools are presented. Strategic analysis and planning are part of strategic management with the goal to help companies to formulate better strategies by using a systematic approach to strategic decisions. The three stages of strategic management are the strategy formulation, implementation, and finally evaluation. When the strategic analysis has been completed, the strategic plan can be formulated. This consists out of a detailed company strategy focusing on the businesses itself. Essential elements in the strategic plan are market positioning, the competitive advantage of the company, and finally the company’s brand strategy.
Marketing planning tools are presented. Marketing is an essential element to the success of any type of business. It is a tool by which companies are able to create value for its customers. In order to
11 Pinson, L (2008). Anatomy of a Business Plan. 7th ed. Tustin: Out of Your Mind... and Into the
create a successful marketing strategy, it is essential that the target market is identified. After that, it is possible to create a suitable marketing strategy. The most widely used tool for this is the marketing mix. Marketing consists of many topics such as pricing, branding, distribution channels, and advertising to name a few. This can all be categorized into the four p’s or marketing mix. These categories are product, price, place, and promotion.
Financial planning statements are introduced. The financial plan is everything of the business plan translated into quantities. When making financial projections, certain statements need to be used. The statement of financial needs shows how much funding is needed to start a company. The cash budget is a detailed plan of future cash flows and is composed of four elements: cash receipts, cash disbursements, net change in cash for the period, and the ending cash balance. The income statement is an overview of revenue(s), expenses, and profit. Finally the balance sheet is an overview of the company at a certain point in time which shows the value of the company.
2.6 ANSWER TO THEORETICAL RESEARCH QUESTIONS
This section of the thesis will briefly answer the theoretical research questions. The answers are summarized answers of the information found in the theoretical framework.
1. What are the various external factors of strategic management that affect a company?
Various external factors that affect Anna’s green tea are political, economic, social, technological, environmental, legal, and cultural factors. These factors are outside determinants and cannot be controlled by the company. Therefore, strategic management is about creating a suitable strategy that reaps advantage of the external opportunities while at the same time reduces the threats the company may face.
2. What strategic management methods are needed to determine a company’s internal strengths and weaknesses?
Strategic management methods needed to determine Anna’s green tea’s internal strengths and weaknesses include the SWOT analysis. This tool is the most basic form of listing strengths weaknesses opportunities, and threats. As it is too basic to use for this instance, we are using the Strategic Factor Analysis. It is a much more professional way of analyzing the company’s strengths weaknesses opportunities, and threats by using weights and focusing on an internal analysis, external analysis, and finally a combined summary.
3. What are the essential elements of a company profile?
The essential elements of a company profile are firstly the company form. There are many forms each with their own advantages and disadvantages. Based on the company form you can build on other things related to the company. Secondly it is essential to know the company operations. Only if you know what the company does to make money, can you make analyses about certain things.
Finally it is essential to know the organizational (company) structure of the company, as it gives a clear view of how the company is built.
4. What financial planning tools are needed to assess the financial viability of a company?
The financial planning tools needed to assess the financial viability of a company are the statement of financial needs, the cash budget, the income statement, and lastly the balance sheet. The statement of financial needs is meant to give an overview of the amount of money needed to establish the company and make it operational. The cash budget is an overview of the timing of incoming and
outgoing cash. This is important because you might not have enough cash at certain periods of time and might not be able to meet the required financial obligations. The income statement shows the profit/loss of the company by subtracting all expenses from the earned revenue. Lastly the balance sheet shows the value of the company at a certain point in time. These statements combined give a clear picture of the financial viability of a company.
3.0 MET HOD OL OGY
Research methodology is a way to systematically solve the research problem. It is necessary for a researcher to know not only the research methods/techniques, but also the methodology, the logic behind the techniques. It basically provides the methods of the research process, giving the reader a better picture of this thesis, and the reasoning behind the methodology choices. This chapter consists out of four parts: 3.1: Research method, which is about the research method(s) I will use for this thesis. 3.2 Data collection method shows what methods I will use to collect the data. There are various ways to collect data, and based on the research method, the right data collection method needs to be used. Then chapter 3.3 Data analysis procedure is about how the acquired data will be analyzed. This is especially important for primary data. Finally chapter 3.4 discusses the reliability and validity of the data and sources that are being used in this thesis. It is of utmost important that sources are reliable, because it can make or break a research.
3.1 RESEARCH METHOD
First of all, the decision has to be made on whether to use qualitative or quantitative data. For my project I will use mixed research. This means that I will use both qualitative and quantitative data in my research. As my thesis is based on both exploratory and explanatory research objectives, the mixed research is the best option. I will have to use quantitative data when analyzing the tea and coffee market of the Netherlands. However my thesis is also about finding trends and new developments in this industry, which is qualitative. I would say that 70% of the thesis is qualitative, while 30% is quantitative.
3.2 DATA COLLECTION METHOD
The primary method used for data collection is secondary research. I will use credible sources that have done their research to complement my research with. I understand that the data needs to be reliable, suitable, and adequate. Because I need to research the market it is hard to use primary data, because it takes a lot of time, and other companies might be far more specialized in certain fields, and thus using their information might be more credible to use. The secondary data is derived using desk research. Most of the information will be from the internet. Besides secondary research, I will also use interviews for data collection. I have found a recent interview by another investigator of the tea and coffee branch, which I might use as it is beneficial for my research.
3.3 DATA ANALYSIS PROCEDURE
There are special methods for the analysis of data, however in my case, this is not really needed.
Because I’m using mostly qualitative data, I don’t need to analyze specific data from questionnaires or other data collection methods. The only quantitative data used is historical data about the consumption of tea and coffee. As for the financial part of the research, it is based on projections. So again, this is not relevant for me.
3.4 RELIABILITY AND VALIDATY
It is always a question if the collected data is actually reliable and valid. To make sure that it is, I am using recognized sources for my secondary data collection. Data about the industry, demographics, and other figures about the Netherlands, is found from CBS, Centraal Bureau Statistiek. This is a 100% credible source as it’s from the Dutch government. Other data about the tea and coffee branch are from credible consulting companies.
To make sure that the data is valid, I check the date of the data collected and information found. If data is older than 2010, I will not use it. As I need to analyze the company’s current internal and external environment, I will make sure that all the data I collect is recent.
4.0 FI NDI NGS /E MPI RI CAL F RA MEWO RK
This chapter is the empirical framework of this thesis. It consists out of four sub chapters that are listed in such a way to make sense and to provide better understanding. These chapters are:
4.1: Company profile: This is the basic company information, which is needed to continue with the external analysis. This includes:
Mission, vision & objectives: The mission, vision and objectives of the company are the essence of the company. It answers the question of why the company is established and what the company would like to achieve.
Legal form: Shows the type of legal form of the company, and the advantages versus the disadvantages of the legal form chosen.
Company structure: Shows an overview of the organizational structure of Anna’s green tea.
Company operations: Describes what main activities the company is engaging in.
4.2: Environmental analysis: This chapter analyzes the external environment of the company which consists of the PESTEL analysis, industry analysis, and a market analysis. It is about the outside forces that affect the company.
PESTEL analysis: A business framework which helps understanding the Macro- Environment of the company. It helps to analyze the environment of the Netherlands.
Industry analysis: Analysis of the tea/coffee (bar) industry by using the Porter’s Five Forces framework to assess the industry’s competitiveness and attractiveness.
Market analysis: Analysis of the tea and coffee market in the Netherlands. It also includes an extensive analysis of the tea and coffee bar branch.
4.3: Competitive environment: The competitive environment is an analysis of the company’s main competitors. It provides information about these companies and lists strengths and weaknesses, which helps to formulate a strategy.
Competitor analysis: Analysis about Anna’s green tea main competitors in the Netherlands.
4.4: Research on viability: With the information of the previous chapters, this chapter is about the strategy formulation. Here, the best strategy is formulated, and research is done about the viability of the company. It consists of the SFAS analysis, strategic plan, marketing plan, and a financial plan.
SFAS: Evaluation tool to evaluate the company. It identifies the company’s strengths weaknesses, opportunities, and threats. The strengths and weaknesses are the internal factors, while the opportunities and threats are external factors. By giving ratings, one can determine the position the company is in.
Strategic plan: Formulation of the company’s strategy. This is done by using market positioning, competitive advantage, and brand strategy theories.
Marketing plan: Presents the company’s marketing strategy by using segmentation to define the company’s target group, and the (marketing mix) four P’s: Product, Price, Place, promotion.
Financial plan: The quantitative part of the research on viability. Consists of the statement of financial needs, cash budget, income statement, and a balance sheet.
4.1 COMPA NY PROFILE
This is the first part of the empirical framework. The company profile provides information about the company itself. Basic company information is needed to paint a picture of the company and its operations. This chapter starts with the mission, vision, and objectives of the company, continues with the legal form, then the company operations will be described, and finally the organizational structure of the company will be given. This chapter refers back to chapter 2.1 of the theoretical framework.
MISSION, VISION, & OBJECTIVES Mission
To make and serve the best Japanese green tea beverages and food, in modern Japanese-style stores.
Vision
To enhance people’s lives with Japanese tea culture in a modern way Objectives
To create a modern place for people to gather and socialize inspired by Japanese culture
To allow people to enjoy Japanese green tea beverages and food everywhere
To provide the best Japanese style dining experience
LEGAL FORM
The company’s legal entity is a private limited liability company, or in Dutch: Besloten Vennootschap, (B.V). The main reason why I choose for the private limited company is that it has the most limited liability for the owners, as a BV is a legal entity in itself. This used to mean a capital investment of 18000 euros is required, but has recently been changed. There is no capital investment needed anymore.
Advantages of a private limited liability company include:
Fast establishment of the company
No private liability, which gives investors more incentive to invest in the company.
A private limited company is a legal entity, which means it operates on its own.
It is easy to protect private equity
Profit is only charged with tax up to 25 percent
Only one shareholder and director is needed
Minimum share capital is a mere one eurocent
A private limited company reflects a reliable image
(Partial) sale of the company is easily established
Of course every advantage also has its disadvantages. These include:
Starting capital of eighteen thousand euros is required. (This is not necessary anymore)
Startup-costs and formalities are higher compared to other entities
To sell shares a notary is required
There is no starters- and entrepreneurs deduction
Higher accounting costs than a sole proprietorship or a partnership
Looking at the advantages vs. disadvantages, I believe the private limited liability company is the best option with the biggest reason that liability is limited.
OPERATIONS
The company’s main operation is quite simple. It’s a new “tea-coffee bar” startup that sells beverages and food based on (Matcha) green tea. Therefore the company’s main operation is running (a) restaurant(s). In the future, the company might increase operations by licensing, so that the company can grow through franchising. So operations include:
1. Operation of restaurant(s)
The restaurant(s) sell food and beverages based on (Matcha) green tea. Beverages include Regular green tea lattes, roasted green tea lattes, red bean lattes, coffee, and juices. Food includes parfaits, ice cream, and crepes.
2. Licensing
In the future, the company will license its brand. However this can only be done when the brand is popular enough and has a large amount of brand loyalty. The company will then receive income from royalties.
3. Franchising
Franchising is also something for the future. If the company’s restaurant(s) become successful, it might want to look to expand, and franchising is a good method to do this, whereby the company’s business model is sold to the franchisee.
As the company is a startup, we will focus on the operation of restaurants for now, as this is the first step in order to continue with franchising and licensing.
COMPANY STRUCTURE
The structure of the company can be portrayed in many ways. First the structure of one restaurant will be shown. However when the company expands and opens multiple restaurants, the organizational structure will be changed, which will be shown as well.
Organizational structure of one restaurant
Figure 2: Organizational structure of one restaurant
Organizational structure of multiple restaurants
Figure 3: Organizational structure of multiple restaurants
4.2 E NVI RO NME NTAL ANA LY SI S
The second part of the empirical framework is about the environmental or external analysis of the company. It starts very broad, with the PESTEL analysis, and then the analysis will be narrowed down to the industry analysis. The industry analysis is done using Porter’s five forces. Finally the analysis will be narrowed down even further, by analyzing the market. Altogether this will provide the necessary information about the external environment of the company. The environmental analysis and the tools used in this part of the thesis refer back to chapter 2.2 of the theoretical framework.
4.2.1 PESTEL ANALYSIS
The PESTEL analysis is a framework used to analyze the Macro-Environment of the place where the company is operating in, in this case the Netherlands. The importance of analyzing the Macro- Environment is that it will help understanding the external environment, which will help the company making better decisions regarding factors such as government stability, tax policies, entry mode regulations, credit accessibility and many more external factors.
POLITICAL FACTORS
The current government in the Netherlands with Prime Minister Mark Rutte, is a pro-European government. The Netherlands at the moment is rated AAA, which is not the case for many other EU countries anymore. The current government has adopted a policy of strict fiscal discipline, whereby with many budget cuts. Because of the economic crisis, the Netherlands is at risk to lose the AAA rating.
Over the next few years, sixteen billion euros of budget cuts will take place, together with structural reforms. One of these reforms is a reduction in tax breaks on home loans.
Polls at the moment show much discontent about the current government, mainly due to the economic situation. People complain about high unemployment, the ongoing economic crisis and weak economy, and the possibility of pension cuts.
What to expect:
The government will remain committed to the disciplined fiscal policies in budget cuts to overcome the economic crisis. The government will aim to bring the budget deficit down to 2.6% of the GDP.
The suggested budget cuts will be implemented, and finally if the economic situation stays bad, and if public discontent keeps rising, strikes can be expected.12
ECONOMIC FACTORS
Let’s first have a look at the major macro-economic indicators. The figure below shows these indicators of the Netherlands. Looking at these indicators, the economic situation in 2012 is bad. The biggest reason for this is the economic crisis. As Germany and other countries are starting to show signs of recovery, the Dutch economic situation remains bad.
2010 2011 2012
GDP growth (%) 1.63 0.99 -0.96
Inflation (yearly average) (%) 1.28 2.35 2.45
Budget balance (% GDP) -5.6 -5.1 -4.5
Current account balance (% GDP) 7.9 10.1 10
Public debt (% GDP) 63.1 65.5 71.2
Figure 4: Macroeconomic indicators Netherlands Source: World Bank
12 Reuters. (2012). Political risks to watch in the Netherlands. Available:
http://www.reuters.com/article/2012/12/03/dutch-risks-idUSL5E8LUH7Y20121203. Last
Coface, a credit insurance company has made an analysis about the country risk of the Netherlands that I will state below.
“Strengths:
Port operations (Rotterdam, leading European port)
Diversified exports (refined oil, natural gas, automotive, electrical equipment, IT equipment)
External accounts in surplus
Unemployment relatively low by international standards
Public debt under control Weaknesses:
Very open economy, dependent on European economic conditions
Banking sector shaken by the crisis
Substantial household debt
Ageing population, threatening the solvency of pension funds Risk assessment:
Severely weakened domestic demand: Hit by fiscal austerity, a slowdown in world trade and depressed private consumption, the country did not escape the recession in 2012. The economic gloom is expected to continue in 2013. Internal demand will remain depressed due to the weakness of real household income, rising unemployment, the worsening property market, continued fiscal consolidation and under-utilization of production capacity.
Moreover, sales abroad will remain constrained due to weakening demand from the euro zone. The contribution of foreign trade to growth is, however, expected to remain slightly positive because of slower import growth.
Highly exposed to the external environment: Although the economic fundamentals remain sound (external accounts in surplus, public debt still contained), the country was considerably shaken by the financial crisis in 2008-2009, given its financial and commercial openness. Burdened by the cost of the American mortgage crisis, several banks had to be rescued by the government. As regards trade, the country has a satisfactory level of
competitiveness and has gained market share in Europe. It remains, however, very sensitive to the international economic situation, given the economy’s high degree of openness.
Households over-indebted, banks and businesses bruised by the worsening of the economic situation: Property prices continued to fall and many property owners are seeing the value of their assets fall below that of their mortgages. This is particularly damaging in the Netherlands, where household debt has reached record levels (128% of GDP at the end of September 2012) due to the mortgage debt boom, itself favored by tax deductions. The banking sector is facing a fall in its profits and a surge in non-performing loans because of the housing market deterioration and the recession. Finally, businesses, whose financial situation was rather sound in the past, are also seeing their profits sink. Bankruptcies grew by
21% in 2012, with construction and trade leading the way. At the same time, payment incidents recorded by Coface substantially increased.”13
Looking at the risk assessment by Coface, the economic situation in the Netherlands is alarmingly bad. First of all domestic demand has weakened severely. Prime Minister Rutte keeps saying to spend money; however people are saving at the time of crisis. Fiscal policies are very strict, and
unemployment has not been this high since a very long time. Purchasing power of the Dutch people is decreasing as well. As the Netherlands is a very open economy and dependent on the external environment, it will only start to improve economically when other countries in the EU will too. I do have to mention that the data by Coface is based on 2012, and that now in 2013 bankruptcy started to decline again and prices of houses are starting to go up a little, so there is still a little bit of hope.
All in all, under these circumstances comparing the economic situation to other EU countries, the Netherlands does not have to complain. It still has the AAA credit rating, and the government has everything under control.
SOCIAL/DEMOGRAPHIC FACTORS General Social Data of the Netherlands
Population 16.7 million
Population growth rate 0.452%
Median age 41.5 years
Life expectancy at birth Total: 80.91 Male: 78.84 Female: 83.08
Nationality Dutch
Urban population 83% of total population
Languages Dutch, Frisian
Major cities Amsterdam, Rotterdam & Den Haag
Figure 5: General social data of the Netherlands14
The small country of the Netherlands, with 16.7 million inhabitants, is the fourth most densely populated country across the globe. Dutch society is very much structured and most things are planned in detail. From work life to private life, everything needs to be planned to the smallest detail, as changes are not welcomed. The society in general is very open and tolerant. The Dutch religion is based on Calvinism, however most people do not attend church anymore. Even so, Calvinism still has big influence on Dutch beliefs and values. Dutch people are known to be “greedy”, however it’s just that they do not like to waste things. There are no real extremes in Dutch society. In general they don’t have extreme luxurious lifestyles. Dutch people frequently go on vacations abroad, which they do to relax and forget work for a while. The Dutch society is egalitarian. Status is obtained through study and work and every person is equal.15
Demographics:
13 Coface. (2013). Netherlands Synethesis. Available: http://www.coface.com/Economic-Studies-and- Country-Risks/Netherlands. Last accessed 23rd July 2013.
14 Index Mundi. (2012). Netherlands Demographics Profile 2013. Available:
http://www.indexmundi.com/netherlands/demographics_profile.html. Last accessed 28th July 2013.
15 Breukel, E. (2012). Dutch society and working culture. Available:
http://www.expatica.com/nl/essentials_moving_to/country_facts/The-Netherlands-at-a-
Figure 6: Age structure Netherlands 2013 Source: CBS
Looking at the age structure of the Netherlands society is getting older. Elderly people have different needs, and as this company’s target group is mainly young people, it is important to be aware of that.
Continuing on, our operations will be in three provinces, which are Zuid-Holland, Noord-Holland, and Utrecht. These three provinces combined have a population of 7.5 million people. Also the population density in these provinces is quite high (as can be seen from the figure below), which makes these places an excellent location for the new business venture.
Figure 7: Netherlands population density
