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Contents Page

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I. Executive summary of Pizzalicious.. Page 3 II. Current Positions:.Page 4-8 PEST (L) Analysis SWOT Analysis III. Strategies of Pizzalicious:Page 9-22 Vision, mission, objectives Sources of competitive advantage Stakeholders KPIs Review of competition Major risks, uncertainties, and contingency plans IV. Marketing Considerations:.Page 23-26 Market Research + STP Marketing Mix V. Operation Considerations:.Page 27-30 Shop layout Hours of operation Production levels Production systems Service process Handling stock Assessing risks Procurement and logistics VI. HR Considerations:Page 31-34 Staffing requirements Training Pay or Reward system for Staff Health & Safety and other risks VII. Financial Considerations:.Page 35-41 Cash Flow Forecasts (1 year monthly + 2 years annual) Profit & Loss projections (3 years annual) KPIs Sources of Funding VIII. Legal Considerations.Page 42-43 Form of ownership/business Intellectual property rights Licences IX. BibliographyPage 44-50 1

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X. Appendices

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1. Pizza Delight 2. History of Pizza 3. Just eat web site 4. By the slice menu 5. Questionnaire 6. Perceptual map 7. Perceptual map 8. Database 9. Database (result) 10. Database (result) 11. Promotion a. Menu b. Loyalty card 12. Layout of shop 13. Equipment 14. Demand Level 15. MAP 16. Suppliers (AMATO) 17. Dominos 18. ROTA 19. Job Specification 20. Inflation 21. Risk Assessment 22. Minimum wage 23. Training course 24. Fire (Safety) 25. Food Hygiene 26. Disability 27. Source of Finance 28. Legal Consideration 29. Marketing KPIS 30. The Distance between supplier (1) map 31. The Distance between supplier (2) map 32. Porters generic strategy 33. Trade/ Waste collection cost (e-mail) 34. Business rate payable 35. Business rate 36. Electricity quote 37. Water (united utilities) quote 38. Broadband (talk talk) 39. Petrol Price 40. Cash flow statement and Profit and Loss account projections 41. Balance sheet projections 42. Excel file and document on CD

Executive summary of Pizzalcious Ltds business proposition 2

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Pizzalicious Ltd, as a new business, has analyzed its micro and macroeconomic environment using PEST(L) and SWOT analysis, in order to advise its strategies, goals and objectives for the three years. Therefore, the business will focus on the start up survival strategy in the first year and growth strategy in the following years after acquiring the necessary resources. To achieve its strategic objectives, Pizzaliciouss departments will be managed to their full capacity. The business has assessed the risks and prepared contingency plans in case of their occurrence. The marketing department has conducted sufficient market research to identify the customer base, and levels of demand. Based this, the operations manager has determined the appropriate levels of stock, equipment needed as well as taken other operational considerations into account. The HR manager matched the demand levels by hiring appropriate number of staff, and conducting sufficient training to prevent the identified risks. The legal manager has made sure that the business complies with all regulatory and legislative requirements. The business will start operating on the 1st February 2010.

An assessment of the macro and micro-environments Table 1: SWOT analysis for Pizzalicious 3

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Strength:
Location (on the main busy road + amenities of Salford University close by) Large customers base ( 2 main segment group of Salford University students and other local residents) Lack of competition ( no pizza shop located in the langworthy area) Low Cost of rent Limited liability company status Lease equipments ( as a source of funding) Good parking location (make convenience for the customers and own employees)

Weakness :
Low start up equity (40,000) Building size (3 floor) Customers expectation (the main segment groups are very price sensitive as a result the price of product cannot be overprice) No room for expansion (all properties which next to Pizzalicious has already been taken) Stocking system (stock ordering is done manually by the employees every week, data might not be updated as each week orders is made by a different person)

Opportunity:
Expand business in future A possibility to diversify the menu (to offere more choice of food to customers) Low government interest rate (0.5%)( Pizzalicious can acquire more capital with less interest rate to pay) To provide eat-in service To advertise in the university Pav and student union ( to attract more potential customers) Offer 10% discount for students and local resident. (to increase customers loyalty and satisfaction)

Threat :
Future competitor ( outsider might find it attractive to invest in the future, Pizzalicious might lose its market share from this perspective) Security (high crime rate in Salford area, and this might be an issue when comes to recruitment) GDP growth rate (if the % of GDP arise which mean Pizzalicious need to pay more for stocks) Unemployment rate HRM (low retention of staff) Increase VAT back to 17.5% in January 2010

The above box

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explains the main SWOT issues and the below text will analyse the significance of the implications of these issues Strength: Pizzalicious is formed as a limited liability company; as a result the owners of the company maximium losses are their investment if the business is liquidated. The liability of the business is limited to its assets (Business Link, 2009). This is likely to attract investors in the future when the company wishes to issue share or gain sources of finance. Weakness: Pizzalicious premise is a 3 floors unit shop, ground floor is use for trading and the remaining 2 floors are for stock storage and staff room. This is a disadvantage for employees as they might need to walk upstairs several times during their workingday. The stairs are a major hazard, hence health and safety training must address this risk (HSE, 2009). Also there is no space for Pizzalicious Ltd to expand in its current location (Google Maps, 2009). Opportunity: One of the objectives for Pizzalicious Ltd is to expand and franchise the business in the long term. The possibility of expansion is high if Pizzalicious Ltd maintains a good level of profit, so the business can follow its strategy. Threat: The percentage of unemployment in Salford is 7.7% (Nomis Web, No date). This is higher compared to other regions in UK, hence is a major threat to Pizzalicious. High unemployment means our customers have less disposable income to spend. Competitors will also be affected by this threat, which could increase competitive rivalry and cause a price war.

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Table 2: Macro environmental PEST(L) analysis for Pizzalicious Ltd: Political and Economic The below table shows the main issues from PEST(L) analysis likely to affect Pizzalicious Ltd with the major potential factors affecting the business.

Political

The major political constraint on Pizzalicious Ltds operations is the upcoming UK general election in May 2010 which implications are a possibility of tax increases thus resulting in less disposable income of the businesss potential customers due to increase in income tax (DirectGov, 2009). Also Pizzaliciouss potential profits will be reduced if corporation tax is increased. The most significant economic factor for Pizzalicious Ltd is The Bank of England interest rates have remained at 0.5% for the last 8 months (Business Times Online, 2008), thus an increase in interest rates will result in potential sources of finance costs will increase and further reducing consumer disposable income as mortgage and loan repayment costs will be higher.

Table 3: Social and Technological evaluation from the PESTEL analysis


6

UK g 2010 poss gove chan Taxa

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The major social constraints on the business is the government healthy-eating campaigns such as Change for Life (NHS, 2009) as they have massive implications on the consumption of pizza as the population is encouraged to eat healthily. Further, ethical and religious beliefs such as vegetarian and halal meat have a major influence on Pizzaliciouss range of products and corporate social responsibility image (Halal Food Authority, 2006).

The major technological factor which is important for Pizzalicious is technological innovation such as equipment. The implications of this mean

Social Lifestyle chang Large fo from a y Governm Feed me and 5 a d Demographics:


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Pizzalicious can grow in the future such as e-commerce to increase customer service and market the business. Innovative equipment will reduce energy consumption and cooking times allowing the business to provide an efficient service (DMS Innovation, 2008) Table 4: Environmental and legal evaluation from the PESTEL analysis

The major environmental factor likely to affect Pizzalicious Ltd is recycling which implications are that the business needs to be aware of recycling waste and finding alternatives to using cardboard pizza boxes (DMS Innovation, 2008)

The major legal factor likely to impact on Pizzaliciouss operations is government legislation such as Working Time Directive (DirectGov, 2009), National Minimum wage (DirectGov, 2009), Discrimination Acts (Business Link, 2009) and the Heath and Safety at Work Act (HSE, 2009). The business must comply with legislation; by undertaking a risk assessment, managing staff-rotas and complying with the minimum wage.

Pizzaliciouss Strategy:

Environmental Environm (DirectG Paper/ P recycling Energy s bulbs, do


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Pizzaliciouss vision is to become the finest pizza take-away within Langworthy area, whilst expanding into the catering market and franchising Pizzalicious in the medium term. The overall goal of Pizzalicious is to provide quality, delicious and affordable pizza to our target market of Salford university students and local residents. Pizzaliciouss strategy for the first two years of operation is to focus on start-up survival by breaking-even and gathering necessary resources to focus on growth via differentiation in the future (Johnson et al., 2008). The business lacks the intangible resources such as goodwill and brand loyalty. Initially, the business lacks the people resources in terms of skills and experience and the financial resources as the business is limited with 40,000 start-up capital. The business aims to acquire intangible, physical, people and financial resources in short-term in order to achieve strategic objectives. To ensure value activities; the managers need to ensure deliveries are on time, stock levels are maintained, to provide quality training and enable the products to be available online. From the PEST(L) analysis, the managers have decided to focus on growth strategy in third year of trading with the aim of building and sustaining a superior level of performance. To achieve this, the business will use a strategy of Differentiation focusing on a broad target market (Marketing Teacher, 2009). The business will focus on adding-value differences for the customers such as using quality ingredients, better availability of the products, online ordering, experienced employees and on-time deliveries. The business must ensure that resources are utilised in the most efficient way to ensure that the business provides quality products and a differentiated service. The business will focus on Differentiation with a price premium (Appendix 32) to achieve 20% market share of pizza industry in the Langworthy area (Nomis, No date). Pizzaliciouss mission statement is to be the finest pizza delivery shop within the Langworthy area, whilst continuously taking into account our stakeholders needs. In addition Pizzaliciouss main objective is to provide quality affordable pizza to our target market through differentiated products and excellent customer-service. A long term objective is to franchise the business and to expand into the catering market. By 2012 our objective is to gain 20% market share of takeaway pizza shops in the Langworthy area. The Marketing objective is to create products which have USPs to distinguish from our competitors. The Operations objective is to manage capacity efficiently to ensure that supply meets demand.

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The Human Resource objective is to retain employees over the medium-term by continuously training staff whilst offering attractive reward packages. The Legal objective is to comply with all legislation which relates to Pizzaliciouss daily activities i.e. health and safety and employee legislation. The Financial objective is to maintain a healthy cash-flow enabling Pizzalicious to break-even in the first year. In the long term, the objective is to generate a sustainable profit and provide healthy dividends for investors.

Table 5: Key Performance Indicators for Pizzalicious The KPIs will illustrate whether the business has achieved the above objectives.

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Key performance indicators: in Marketing: Return on marketing investment (ROMI) Customer satisfaction Value chain in Operations: Stock turnover (%) Actual cycle time (mins) Gross margin return on inventory: () Margarita Meat Feast Hawiian Hot and spicy Vegetarian Total gross margin return on inventory () in HR: Training costing () Retention of employees Average training cost per category (yearly): Pizza persons Chef assistants Operators Cleaners Delivery drivers Average cost of training per category HR Budget yearly/ sales turnover (yearly)

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Year 1 146% Year 2 413% Year 3 626%

763% 15min 27,863 33,290 32,339 40,228 34,073 167,792

597% 15min 43,723 52,239 50,746 89,765 53,468 289,941

494% 15min 98,720 117,949 114,579 142,529 84,897 558,674

2,860 80% 597 597 617 35 35 376 55.19%

2,343 80% 826 482 648 0 18 395 34.25%

2,291 80% 650 749 499 18 37 391 69.07%

in Finance: Profitability: Gross Profit Margin Operating Profit Margin Net Profit Margin ROCE Return on investment (ROI) Efficiency: Stock turnover Cash turnover times Days of liquidity (days) Revenue per employee

Year 1 89% 8% 5% 23% 7% 763% 2 397 33874

Year 2 151% 35% 25% 61% 101% 597% 1 992 46260

Year 3 173% 46% 29% 60% 184% 494% 0 1893 60509

Liquidity: Current ratio (Decimals) 0.05 5.76 7.14 Current ratio 0.05:1 5.8:1.0 7.0:1.0 Working capital 92,658.44 262,583.46 Table 6: Pizzaliciouss competitive advantage over its main competitors, listed 556,169.11 in

accordance to their significance.

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1.Large consumer base

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Although local residents account for a substantial amount of the target market, university students allow for an influx in sales during several months of the year. It is clear during out of semester time, the demand levels will significantly decrease. Pizzaliciouss suppliers are in close proximity to the shop (approx 7 miles), therefore if one product is in high demand then we can easily order the increased amount of ingredients and it can be delivered within a reasonable time. Pizzaliciouss prime location allows easy access to its target market. Student accommodation and local residents surround the premises therefore it will allow for shorter delivery times thus if demand continues to increase we can react quicker. Pizzalicious is situated on a busy highway which leads directly to and from the city centre; public transport tends to be popular with students thus passing trade will able us to acquire the desired market share. Consumers/passing trade are able to access the shop with ease if they want to pick up their order.

2.Close access to suppliers

3.Location

4.Easy access- Main bus route

4.Easy access - Parking outside shop

Table 7: Pizzaliciouss stakeholder groups significance table

Stakeholder group: Consumers Suppliers 12 Employees Local community Government

Significance 1 2 3 4 5

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Key: The significance of the stakeholder group in this table is vertical (1 being most significant- to 5 being least significant).

The most significant stakeholder group is consumers as Pizzaliciouss strategies success depends on demand from the large customer base in the Langworthy area. The customers will have expectations of the business in terms of the menu, the quality and the price of products supplied. Pizzaliciouss second most significant stakeholder group is their suppliers which provide the raw materials and other goods needed to produce Pizzaliciouss menu. It is essential that Pizzalicious maintain a good relationship with this group as to meet customer demand, ingredients must be on hand. The suppliers expect regular business and prompt payment for the goods supplied. Another significant stakeholder for Pizzalicious is their employees which hold an important stake in the future business requires to performance of the business as they provide the labour which the operate. Employees expect their jobs to be secure, good working conditions to be provided, to be paid a fair wage, to be satisfied at work and for training to be provided.

Competitor Analysis
The Langworthy area is littered with take-away shops. Pizzaliciouss location of Broad Street means close direct competition. Several of the pizza shops have been established for a long time and will have a reputable consumer base in the area. 13

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Pizzaliciouss competitors may focus on their loyal consumer base and offer loyalty discount to customers, this would strategically enhance their position over Pizzalicious.

Table 8: An analysis of Pizzaliciouss competitors in the Langworthy area including prices, number of products available, opening hours and delivery service

List of Pizza Shops In the Salford area Pizza Delight Pizzaeria Perfecto Pizza Costa Perfect Pizza Casa maria Venecia Pizza Valentina Pizza Pizza House Expresso Pizza La Citta Mario Pizza Miami Pizza Buy the slice

Open 7 days a week Y Y Y Y Y Y Y Y Y Y Y Y Y

No of pizzas available 21 18 19 18 19 20 23 20 23 17 19 21 14

Basic Price of a 9/10 Margheritta 3.30 3.00 3.50 3.00 3.50 3.00 3.50 3.00 3.50 3.50 3.50 3.40 3.45

Av erage price of pizza 9 5.20 4.80 4.76 4.56 4.78 4.18 5.00 4.91 5.00 5.45 5.28 4.29 5.90

Average price of 12 6.98 6.61 6.63 6.44 6.69 6.31 7.09 11.75 7.46 8.90 6.55 6.31 8.89

Average price of 14 8.58 8.15 8.10 8.06 8.42 8.10 9.11 8.63 9.09 11.47 8.80 8.34 11.53

Delivery available Y Y Y Y Y Y Y Y Y Y Y Y Y

Key: Pizzaliciouss most influential competitors Pizzaliciouss least influential competitors

Table 9: An analysis and comparison of the key competitive factors for Pizzalicious Ltd and its main competitors

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Competitive factors
1.Location from Salford university 2.Available to
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1.Promotions i.e. meal deals

The competitors menus are extensive; but pizza is not their primary focus e.g. Pizza Delight; the closest competitor in terms of distance, recently changed their management and updated its menu by adding new pasta dishes (Appendix 1). Other pizza shops also offer chicken and burger meals which is not included in Pizzalciouss menu. Through this, our competitors will isolate customers and compromise the quality of their products.

Key for Table 9 1 2


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The local competitors pizza pricing is relatively the same; Pizzeria Perfecto use special offer meal deals to their advantage by adding value which is vital to attract the target market. Furthermore local competitors fail to acknowledge the need for authentic Italian pizzas. Secondary research has highlighted the concept of true Italian pizzas (Appendix 2). Pizzalicious used Dominos in its analysis to demonstrate a competitor who is at the other end of the market. This franchised business operates in the same market whilst using premium prices. If Pizzalicious were to use similar pricing strategies; it might struggle to survive in the first year as customers could simply go elsewhere, unlike Dominos Pizzalicious do not have an extensive customer base and name recognition across the world. Pizzalicious will try to obtain future plans of local competitors, e.g. any changes to menus in terms of products and price but currently it seems several pizza shops have become complacent as Laura discovered on one of the menus (Appendix 4) that they have a new menu arriving in 2008 and we are progressing into the year 2010. In addition Pizzalicious can keep track online of the competitors performance via JustEat and other websites (Appendix 3) where consumers rate their pizza experience.

Table 10: Analysis of key performance factors of Competitors in relation to Pizzalicious Ltd Table 10 lists the key performance factors in order of how vital they are to Pizzalicious, thus product quality is considered more important than the availability of our products online. 17

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Key performance indicators
Product Quality Pizza Authenticity

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Pizzeria Perfecto Pizza Costa Dominos

Pizzalicous Pizza (aim to be) Delight

Low Priced Pizzas Range of different pizzas


Discounts, free extras Delivery costs

%%%%

%%%

%%%

%%

%%

Name Recognition Good customer service Various ways of ordering from takeaway shop

Key: 5 symbols - Best in class 4 symbols - Above average 3 symbols - Average 2 symbols - Below Average 1 symbol - Very poor
Diagram 1: Perceptual map of the two key factors-price and quality

Competitor analysis: Summarise obtained information using two crucial factors

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Price High price

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X Dominos Pizza Authenticity Low Quality X Pizza Delight X Pizza Costa X Pizza Perfecto X Pizzalicious

High Quality

Low Price Diagram 1 compares two key factors, price and quality, which will enable Pizzalicious to differentiate in a highly competitive market. In terms of quality Pizzalicious will try to produce genuine Italian pizzas with original toppings, thus making the pizzas more authentic.

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Table 11: Analysis of Pizzaliciouss major risks and uncertainties

Major R isks for P izzalicious:

-Recruitment and retention of


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Table 11 Continued

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-Equipment failure

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Pizzalicious has identified global risks in its business environment as failure to gain sufficient demand and an increase in suppliers costs. As a result of that the business might fail to break-even; in the case of occurring, the mangers prepared contingency plans. If the lack of demand happens, the business will turn to various promotional tactics in order to attract the customers. If supplier raises prices, Pizzalicious will turn to the secondary supplier, Makro Cash&Carry. If these steps fail, and consequently the business fails to break-even, its survival strategy for the first two years, and growth strategy for year3 will fail (Johnson ,2002).

Marketing considerations:
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For primary market research, a questionnaire was conducted (Appendix 5) taking sample of 50 of the Langworthy area. This questionnaire enabled Pizzalicious to understand on average how much people spend on pizza and how often they consume it. Open and close questions have been asked, and the data is stored in a database (Doyle & Stern, 2006). The marketing manager has undertaken a field observation during peak-time between 7-9pm. This research has helped the business to find out how many potential customers are situated in the area. The secondary research looked at the takeaway website Just-Eat (Just-Eat, 2009) to allow the business to establish how many competitors operate in the delivery 5 mile radius. Thus this research has helped Pizzalicious to select their target segment and evaluate the attractiveness of each group. A perceptual map (Appendix 6/7) has been created. Finally, marketing strategies for Pizzalicious have been developed based on the results (Appendix 8/9/10).

Product:
The main products that Pizzalicious sells are a range of different Pizzas and sidedishes. These products have high elasticity of demand within market segment (Appendix 8) .Pizzaliciouss marketing strategy is based on product differentiation, therefore gaining a competitive advantage. To satisfy stakeholders needs, Pizzalicious is providing Vegetarian options. For the consideration of the environmental issues, Pizzalicious will compare the cost of using bio-degradable and ordinary packages and containers.

Table 12: A table of pizza types and sizes offered for customers

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Table 13: A table of side dishes offered

Price:

The main customers for Pizzalicious are split into two categories: students and local residents. There will be seasonal demand for students due to term times. In comparison, local residents will demand Pizzaliciouss products throughout the year. There are more than 7,104 residents located in the Langworthy area (Nomis, no date). Pizzaliciouss prices are set to reflect the quality of ingredients used, thus this will allow us to follow the strategy of product differentiation (Marketing Teacher, 2009).

Table 14: The average price and cost of different size pizzas

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Pro offe Mar pi Fungh Hawaii Vege

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Place: Pizzalicious has a competitive advantage as the shop is situated on the main road in Salford on a main bus route and it gives Pizzalicious additional passing trade. Therefore this will benefit customers due to parking spaces and allow access for suppliers to the premise. Picture 1: The delivery area of Langworthy in a 5 mile radius

Average cost p Average price pizza (to mak pizza

(Adapted from Multi Map, 2007) Promotion: Pizzalicious needs to gain maximum sales during the first year as start-up survival is the key strategy (Johnson, 2008). According to research of Moyak, Pizzalicious needs to develop a strong brand image in order to position itself in the market. In addition 25

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strong brand loyalty needs to be built through adopting a loyalty card and to sustain good level of quality in order to satisfy its existing customers, and allow Pizzalicious expand in the future. See appendix 11 for method of promotion which Pizzalicious intends to use to market the business.

Operations considerations:
The layout of the shop (Appendix 12) has been agreed taking into the consideration all the equipment needed, its dimensions (Appendix 13)and easiness of access, dimensions and layout of the building, flow of materials through the process

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Table 15 : The opening times for Pizzalicious Ltd

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and process flow as well as creating the welcoming and safe environment for Pizzaliciouss customers and employees (K.Hey Lecture notes, 2009).

Pizzalicious will have longer opening hours during the weekend than its competitors.

Sunday through Thursday Friday through Saturday


The production levels for Pizzalicious are advised by the market research of demand for pizza in the Langworthy area (Appendix 14). The forecasts of sales are essential as they drive companys decisions regarding staffing, capacity and scheduling systems (Heizer, 2007). Taking into account the customer base, Pizzalicious will be closed during the lunch time, and expecting the peak sales time in the evenings. The managers predict that during the rush hours, 8-12pm weekdays, and 8pm-2am weekends, the businesss sales will be 60% of the whole days sales. Figure 1: Projected demand for Year 1 to 3
10 2 10 0

Note: This decision has bee the businesss customer base as stu focus is to stay open at the weeken nights out, as the market research s
8 0 6 0 4 0 2 0 0 N rml o a Rs Hu uh o r

Figure 1 Projected Demand

The business expects uneven demand levels: not high during the weekdays, apart for the evenings; high during the weekends, especially at night-time, as well as higher demand during the term time, and lower otherwise (Appendix 14). Pizzalicious will aim to introduce various promotional tactics, aiming to raise sales during the less busy periods. Initially, the business will invest in leasing equipment (Operations 27 Table 16: Predicted Yearly Sales levels for Pizzalicious Ltd.

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YEAR 1 3292 3292 3292 3292 3292 1992 1992 1992 3292 3292 3292 3292 35604

General excel file) to meet the demand levels for pizza but without incurring the unnecessary costs.

For more detailed demand levels over 3 years see Appendix 14

Figure 2: Graph to illustrate fluctuations in monthly demand over the three years

MONTHLY SALES January February March April May June July August September October November December Total
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10000
Pizzaliciouss has decided to make their products fresh to order. Therefore, the choice of the supplier is vital for the business and satisfaction of customers, as freshness and quality of the ingredients is crucial (Russel, 1995). The business has chosen AMATO as a supplier as it is close to Pizzalicious (Amato, 2009), which should decrease the amount of late, and cancelled deliveries. The suppliers offer and prices can be found in the appendix 16. The excel sheet shows the business holds mainly fresh stock during the year, in order to avoid any unpredictable instances, Pizzalicious has decided to choose Makro Cash&Carry as its secondary supplier (Makro, 2009). It offers online shopping and next day delivery and the managers can go to the shop themselves in an emergency. Using the demand levels as well as one of the competitors stock orders (appendix 17), the operations manager has decided, for the first 3 years of operations, to hold stock at the levels:

9000 8000 7000


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Table 17 : Yearly stock levels in kg

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Year 1 Stock (kg) level 23571.445
35309.158

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Year 2 Year 3 67415.762

Pizzaliciouss operations manager has identified potential risks, which are summarized under the Risks and Contingency Plan section. Apart from the main risks mentioned above, others include: untrained, rude, or few staff on the shift, late deliveries caused by traffic or cars break-down, etc. Even though there are a number of risks and factors to be acknowledged, the business will do its best to ensure that customers are always taken care of and problems dealt with ASAP. As the products are perishable, it is important that the procurement and logistics are efficient. The operations manager will try to ensure that the ingredients stay fresh and unnecessary costs of wastage are not incurred. In order to insure that few errors are made, the manager has carefully analyzed the demand levels and the additional market research. Therefore the contract with the supplier includes deliveries on a weekly basis, with possibility to change.

HR considerations: Table 18 : Pizzaliciouss staffing requirements for Year 1 to 3

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Year 1

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P/T 0 1 1 2 1 2 Shift 1 2 2 2 2 1 Wage () Overtime Rate 6.56 N/A 6.1 10% 6 10% 5.8 5% 5.8 5% 5.8 5% Overtime Wage N/A 6.7 6.6 6.1 6.1 6.1

Category
Manager Pizza Person Chef Assistant Operator Delivery Cleaner

Number 5 2 2 3 2 2

F/T 5 1 1 1 1 0

Year 2

Category
Manager Pizza Person Chef Assistant Operator Delivery Cleaner Year 3

Number 5 3 2 3 2 2

F/T 5 1 1 1 1 0

P/T 0 2 1 2 1 1

Shift 1 2 2 2 2 1

Wage () Overtime Rate Overtime Wage 6.71 N/A N/A 6.24 10% 6.91 6.14 10% 6.8 5.93 5% 6.27 5.93 5% 6.27 5.93 5% 6.27

Category
Manager Pizza Person Chef Assistant Operator Delivery Cleaner

Number 5 3 3 3 3 2

F/T 5 1 1 1 2 0

P/T 0 2 2 2 1 2

Shift 1 2 2 2 2 1

Wage () Overtime Rate Overtime Wage 6.96 N/A N/A 6.45 10% 7.18 6.37 10% 7.07 6.15 5% 6.52 6.15 5% 6.52 6.15 5% 6.52

All wages are in line with the National Minimum Wage (DirectGov, 2009). As part of the HR retention scheme, Pizza-Persons and Chef-Assistants are paid above the minimum wage to reflect the level of expertise and to protect the businesses assets such as recipes and loyalty. Appendix 18 contains a 2010-2012 staff rota and Appendix 19 contains the job descriptions and person specifications. The HR manager has made the assumption that staffing will increase by 10% in year 2 and by 15% in year 3 in order to pursue the growth strategy. The annual wage increase is based on the average annual CPI inflation for 2006-2008 (Trading Economics, 2008). The second year wages go up by 2.3% and in the third year wages go up by 3.7% (Appendix 20).

Table 19 : The analysis of retention of staff per year

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Year (end)
The HR manager has assumed that the business will retain 80% of staff, thus 20% of employees will be employed in the second and third year (Beardwell, 2004).
Table 20: Pizzalicious Ltd Management pay system including management job roles

The main reward system for managers is a dividend which will be paid depending on business performance which will motivate them to achieve the business objectives.

The main risks identified by the Risk Assessment (Appendix 21) are the risk of fire, burns, slips and falls due to spillages, electric shock and lifting boxes (HSE, 2009). The business must take action to reduce these potential risks by including them as part of statutory training. All kitchen employees must be trained in food hygiene and all employees must be trained in fire regulations. To comply with the Disability Discrimination Act 1995 all shop employees must be trained to deal with disabled customers (Beardwell, 2004). Two full-time employees will be trained in First Aid to ensure that if risks do occur, employees can be treated immediately.

Table 21 : A table of Year 1- 3 training hours per category of staff

Name Samantha 2010 Laura 2011 2012 Peony Patrycja


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Category
Manager Pizza Person Chef Assistant Operator Delivery Cleaner Year 1

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Mgt Training Hours N/A 16 16 12 3 3

Induction Training (hours) In-house Training (hours) External Training Hours F/T extra training N/A N/A N/A N/A 8 8 10.5 8 8 8 10.5 8 8 4 7.5 0 0 3 0 0 0 3 0 0

Year 2

Category
Manager Pizza Person Chef Assistant Operator Delivery Cleaner Year 3

Induction Training (hours) In-house Training (hours) External Training Hours F/T extra training N/A N/A N/A N/A 8 8 10.5 8 8 8 10.5 8 8 4 7.5 0 0 3 0 0 0 3 0 0

Mgt Training Hours N/A 16 16 14 3 3

Category
Manager Pizza Person Chef Assistant Operator Delivery Cleaner

Induction Training (hours) In-house Training (hours) External Training Hours F/T extra training N/A N/A N/A N/A 8 8 10.5 8 8 8 10.5 8 8 4 7.5 0 0 3 0 0 0 3 0 0

Mgt Training Hours N/A 16 16 14 3 3

The HR manager will undertake induction training for shop employees which includes demonstration of how to use equipment and shown the fire-exits. Delivery drivers and cleaners will be given induction training as part of their in-house training. Generic in house training will be provided by the HR manager for Operators: techniques to answer phones, housekeeping duties, how to use EPOS system and how to process orders. In-house training will be provided for Pizza-Persons and Chef-Assistants by the Operations manager in terms of how to use the equipment, where ingredients are stored and health and safety issues. Delivery and cleaning staff in-house training will be provided by the HR manager to show they perform their duties and how to use equipment provided. The HR manager has made the assumption all training costs will include 1 days manager wage to undertake training, and that all employee categories are trained on the same day.

Table 22 : Statutory External training analysis for Year 1-3

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Training type
(See Appendix 22-26) These training schemes will reduce the potential risks identified by the Risk Assessment and will train employees on basic health and safety to comply with the Health and Safety at Work Act 1974 (HSE, 2009). All External training will recur on an annual basis. Each year the full time first-aider will go on 3hour refresher training (St Johns Ambulance, 2009).

Basic fire safety

The general excel file includes the cost of H&S safety signs (Rainbow Safety, 2009), first aid kit, uniforms for kitchen staff, name badges (MBS Wholesale, 2006). New uniforms and first-aid kit will be purchased yearly. Pizza-persons and Chef-Assistants will wear different coloured uniforms and Operators will wear a cap and apron to identify them as employees (Corporate Wardrobe, No date).

Table 23: Additional benefits for Pizzalicious employees

(Benefits adapted from Beardwell, 2004)

Financial considerations:

Food Safetyben Additional Disability alloc Incentives Awareness Month award First Aid Traini Family and frien
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The excel file named Finance contains financial projections for Pizzalicious-the Profit and Loss Account a yearly projection with the Cash-Flow Statement monthly for year 1 and yearly for 2/3. A summary balance sheet has been undertaken to allow analysis of the business in terms of efficiency and liquidity.

Table 24: Analysis of the sources of finance and outline of contingency funds available to Pizzalicious in Year 1
Sources of finance available to Pizzalicious : Existing shareholders funds Small business loan Hire purchase and leasing equipment Overdraft financing Trade creditors

40,000 1000 - 25,000 7596 per year to lease versuss 11942 to buy Arranged with Natwest bank when necessary according to the cash flow statement 7 days credit period

See appendix 27 for detailed sources of finance. The operations manager has leased all equipment for three years and all other equipment such as PC is purchased in year 1. Existing shareholders funds are used to start-up the business by paying for costs such as trademarks, however in year 2 and 3 retained profits will be used as a source of finance. Contingency funds have been established in case financial projections are not accurate due to increased costs or decreased sales such as an overdraft facility and small business loan.

Table 25: The CPI inflation rate for 2006-2008 in which all costs for Year 2 and Year 3 take into account
CPI Inflation Annual: 2006 2007 2008 Index 102.3 102.3 103.7 Increase 2.30% 2.30% 3.70%

(Adapted from Trading Economics, 2008)

Table 26: The What- If analysis results

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Scenario: Cost of ingredients increase 10% Year 1 Cost of ingredients increase 20% Year 2 Cost of ingredients increase 30% Year 3 Sales decrease by 10% in year 1 Sales decrease by 10% in year 2 Sales decrease by 10% in year 3 Staff costs increase by 10% year 2
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Inc in s +4

+1

The What-If analysis has been undertaken to account for three scenarios. The What-If analysis shows Pizzalicious the impact that these scenarios have upon Gross and Net Profit Margin. See excel tab (What-If) for detailed analysis of the scenarios. Financial projections from the Profit and Loss Account for year 1-3 are illustrated through the financial KPIs

+2

Table 27: Profitability KPIs

-2

-4

-7

Graph 3: Gross Profit Margin Year 1-3

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Gross Profit
200% 180% 160%
Over the period, Gross profit margin has increased by 84% as cost of sales figure is spread over more sales; cost of sales increased from 143,455 to 265,845. 140% Graph 4: Operating Profit Margin

120% 100% 50% 80% 45% 60% 40%


Operating profit margin has increased by 38% over the period due increase in sales to 35% spread cost of sales and overheads over. Thus economics of sale is starting to be achieved in year 3 as sales are 46% of cost of sales and expenses.

Operating Pr
89%

40% 20%

30% Graph 5: Net Profit Margin Year 1-3 0% 25%


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Net Profit M

35%

30%

Net profit margin increased by 24% over the three year as the businesses expenses are 25% spread over more sales, hence increasing profitability. In year 1, net profit margin was at its lowest due to high expenditure on start-up expenses.

20%

15%

10%
Graph 6: Return on Capital Employed (ROCE) Year 1-3

5%
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5%

0%

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ROCE
70%

60%

ROCE illustrates how much profit Pizzalicious makes from total assets, this ratio was at its50% in year 2. In year 2 and 3, the business gains more assets due to highest increased sales and cash-flow.

Table 28: Efficiency KPIs


Efficiency: Stock turnover Cash turnover times Days of liquidity (days) Revenue per employee Year 1 763% 2 397 33874 Year 2 597% 1 992 46260 Year 3 494% 0 1893 60509

40%

In year 1, cash is turned-over twice compared to 0 times in year 3, this illustrates that cash 30% than cost of sales. is higher Revenue per employee is calculated for all shop employees to illustrate how much revenue is created by each employee 23% Days of liquidity illustrates the number of days the businesses highly liquid assets can support Pizzalicious without further revenues gained. The number of days increases 20% over the period by 1496 days. This shows the businesses assets are higher than expenses.

Graph 7: Stock turnover for Year 1-3

10%

0%

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900%
Stock turnover has decreased over the three years by 300%, cost of sales has increased as average stock value increased. Table 29: Liquidity KPIs
Liquidity: Current ratio (Decimals) Current ratio Working capital

800%

Year 1 0.05 0.05:1 92,658.44

Year 2 5.76 5.8:1.0 262,583.46

Year 3 7.14 7.0:1.0 556,169.11

The current ratio increases from 0.05 times to 7 times that current assets can cover current liabilities. Pizzaliciouss working capital management increases 463,511 over the period due to increases in sales and cash but similar levels of liabilities.

700%

Table 30: Analysis of areas for improvement and potential problems

600%

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Areas for impr Lower expenses

Source better qu increase cost of


Legal considerations: See appendix for 28 for details 41

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The management team of the business agreed to register as a private limited company limited by shares (Companies House, 2003). Therefore, the business is equally owned by 5 managers who are also shareholders that invested their capital with the right to obtain shares:

Table 31: Analysis of shareholder equity


Shareholder/ Manager: Samantha Laura Patrycja Paulina Peony Total: Number of shares: 80 80 80 80 80 400 Share price: x 100 x 100 x 100 x 100 x 100 x 100 Shares value: 8000 8000 8000 8000 8000 40,000

The business functions as a separate legal entity hence the owners are protected from personal liabilities. Due to lack of expertise management acquired the company formation software online. The electronic incorporation complies with the requirements and is relatively cheap. The company is incorporated in Manchester with its registered office leased at:

72 Broad Street Salford, M6 5BZ

The main objective of the business is to distinguish its activity from those of other competitors. Following the IPR standards the company gained its trade name: Pizzalicious Ltd and is also expressed graphically as a logo. Pizzalicious Ltd is limited by initial capital hence introduction of innovative goods is not predicted. Nevertheless, management decided to register its trade mark to obtain the exclusive right to use it and to ensure consistency with the mission statement brand image (IPO, 2009). To avoid additional costs arising due to lack of professional knowledge, management of Pizzalicious Ltd cooperates with an experienced lawyer that specialises in trademark protection, asset lease and outlining contracts (Stephensons, 2009). After consultation, the managers agreed with the supplier on their terms and conditions. Tentative agreement includes buying stock on 7days credit with the supplier (Amato Ltd, 2008) bearing cost of the deliveries. Stock is delivered weekly with possibility of more frequent orders depending on the demanded stock-levels. Deliveries take place before 4pm during the week and 11.30 on Saturdays. (Amato Ltd, 2008) 42

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Pizzalicious Ltd reviewed business insurance quotes. The choice includes a simple to buy and manage insurance policy that protects the business against unexpected occurrences such as fire, theft, or injury to an employee or customer. (Compare the Market, 2009). The accountant has been hired to take care of companys accounts and to avoid tax fraud. On the behalf of directors, the accountant deals with Corporation Tax liabilities (HMRC, 2009). To comply with the essential requirements, the business obtains a premises licence which covers delivery of late night hot food the main objective of the business, as well as late opening hours that is the time when Pizzalicious is expected to bring the highest profits. (Salford council, no date) The owners of the business are open to food hygiene and safety inspection by local authorities. Accordingly, relevant registration form is return to the Food Safety Section. (Salford Council, no date).

Bibliography
Books:

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Beardwell I., Holden L. & Clayton T. (2004), Human Resource Management: A Contemporary Approach. Fourth Edition, FT Prentice Hall Johnson, G., Scholes, K. & Whittington, K (2008). Exploring Corporate Strategy (Text and Cases), (8th Edition). Prentice Hall International. Dibb,S et al.(1997) Marketing: Concept and Strategies. Third Edition, European ed. Houghton Miffin; New York Doyle P. & Stern P. 2006. Marketing management and Strategy. Fourth Edition. FT Prentice Hall Heizer J. & Render B. (2007). Operations Management Jobber, D, 2005. Principles and Practice of marketing. Fifth Edition, London; McGraw-Hill. Kotler,P & Keller,L.P, 2009. A Frame work for Marketing Management. Fourth Edition, New Jersey; Pearson (Prentice Hall) Riches, S & Allen, V (2009). Business Law. Ninth edition, London: Pearson (Longman) Russel R.S. & Taylor B.W. (1995), Production and Operations Management: Focusing on Quality and Competitiveness

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Lecture Notes:
Davies. J, Dzolkarnaini. D, Avramenko. A, & Roberts. D (2009). Management Simulation Lecture notes. (Management theory input and Strategy inputs). University of Salford. Hey, K. (2009), Corporate Strategy Lecture notes. University of Salford.

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