Sultan Traditional Kebab Shop

Sultan Traditional Kebab Shop
Economics for Managers CO5125:03

Date: 03rd January, 2011 Lecturer: Gregory Trotman
Compiled by:
Karan Gupta
12513097
Ratandeep
12438188
Cigdem Ozdemir
12489140
Karan Gupta-12513097 Ratandeep-12438188 Cigdem Ozdemir-12489140
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Sultan Traditional Kebab Shop has been operating for 4 years. At first it was founded by two owners to put both knowledgeable and expertise together in order to achieve better market share in the middle of the city centre. But because of some conflicts between two owners the Kebab Sho p is operating only by Ibrahim Insel at the moment. The amount of the capital to set up this shop was approximately 300,000 AUD. Currently this kebab shop worth only 250,000 AUD. Its location is great since it is located end of the Queen Street, opposite of the Casino, on the way of the South Bank which gives it extremely good advantage from location in order to reach different target markets as many people have to walk through this way to get to South Brisbane, all the activities like Salsa Party, Concerts take stage in front of the shop. The business type of Sultan Traditional Kebab is both manufacturer and retail. Sultan Traditional Kebab offers wide variety of products to customers with well known Turkish hospitality in order to increase its market sh are, decrease effect of economic recession, to appeal everyone not just the regular customers, and compete with its competitors.
Products
Main products are different variety of Kebab at Sultan Traditional Kebab. Such as Chicken Kebab, Beef Kebab, Lamb Kebab, Falafel Kebab (made of chickpea, consumers are usually vegetarian people), Mixed Kebab (it can be mixture of chicken, beef, lamb and f alafel or mixture of two of them or three of them), Salad Kebab, Spud Kebab (baked potato with salad) .
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However, Sultan Traditional Kebab offers some of delicious Turkish Pastry, such as Gozleme (pastry which has fetta cheese and spinach or only minces inside), Borek (pastry that has fetta cheese and spinach or potato with some herbs or minces inside). Moreover some snacks are sell as well, for instance, dim sim, chips, chicken screw, veggies, chicken roll, chicken nugget, potato jams, chicken pesto pie, meat pie, Mexican pie, vegetarian curry pie, spinach roll, fetta cheese roll and Turkish style omelette. Also as dessert Baklava, Tulumba (a famous Turkish dessert), Rice Pudding, muffin with blueberry, chocolate flavour and Chocolate Pudding are the alternatives for customers. Coffee alternatives are available too, such as flat white, cappuccino, latte, short black, long black, milk shake with chocolate, lime, banana, strawberry and caramel topics, thick shake, mocha, hot chocolate, salep ( a kind of Turkish chai latte, it has cinnamon, milk and small amount of sugar), Turkish coffee, English breakfast tea, camomile tea, herb tea, Turkish style black tea,
Customers
Minority of Sultan Traditional Kebabs customer are from Suncorp Head Office officers, City Councils employee, Courts employees, Telstra Head Office officers, Casinos employees, Myer Centres employees and others tourists, market employees which happens every Wednesday in front of the shop, foreign students. We also cater to the customers going to clubs and night bars because at that time mostly all other food store are closed, the targeted
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customers are mostly young age people who are fond of eating kebabs,as it has nutritional value and taste too. People try and get the food items handy and dont want to sit and eat so provide take away facility to them.
Competitors
We categorised Sultan Traditional Kebabs competitors into two. First one is shops around it at the same location such as Sensational Salad shop next to it, Subway, Mio Asian Food and Grain Sushi Shop. Sultan Traditional Kebabs products are not exactly same with first category competitors, the competition arise from being in the same location and some substitutes like wrap from Salad Shop and Subway, the only similar produc t is coffee which both Sultan Traditional Kebab and Salad Shop sell. There are some customers, who have Kebab everyday, regular customers of Sultan Traditional Kebab whereas some others just decide on daily base, whatever they feel. Therefore they consider other alternatives instead of Kebab. There is a intense competition between Sultan Traditional Kebab, Salad Shop and Grain Sushi Shop who have the biggest market share at the same spot.
3000 2500 2000 1500 1000 500 0 1st Qtr Sultan %22 Salad %33 Grain %28 Mio %15
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Second one is Kebab Shops around it, such as, Twisted Grill (on George Street) and Sunshine Kebab (in Myer Shopping Centre). They have mostly the same cuisine to offer as Sultan Traditional Kebab Shops products, therefore, it is a perfectly competitive market between them. The approximate earning of the three Kebab shops in daily base is as follows:
y y y
Twisted Grills
1,200 AUD
Sultan Traditional Kebabs 2,000 AUD Sunshine Kebabs 3,000 AUD
According to these figures, 48% of the market share (of Keb abs) belongs to Sunshine Kebab, 32% belongs to Sultan Traditional Kebab & 19% of the market share belongs to Twisted Grill.
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4000 3000 S
1000
The market is perfectly competitive since numbers of sellers and buyers exist in the market. Because of elasticity in the market there are not significant price changes on the products. Sultan Traditional Kebab has been operating for four years but they have not changed their prices in terms of staying in the market and remaining the customers despite of increase in rent by 5% every year and other expenses. The customers attended by Sultans Kebab shop vary from a school student who probably lives on the pocket money his/her parents gives to an 80 year old man who lives on his pension, therefore, it is very hard to determine average income of the customers that come to the Kebab shop. However, as per OK Travel, average income of a person living in Brisbane is approximately 630 AUD (http://www.oktravel.com.au/au/qld/brisbane/b risbane/stats/).
T e
We
Th
Sult Sunshine Twisted
S t
h e
2000
Tw te
Tw te
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S t
h e
(http://www.investopedia.com/university/economics/economics4.asp )
The market in which the kebab shop is dealing is in perfect competition because of the economic recession all around the world, diversity in peoples demand, wide variety of the product offers, increase in number of substitutes, rise in number of suppliers and rise in the customers demand along side with increase in their income gives more pressure on the price, especially in food industry. It is effortless to change or find a substitute if the price or quality of the product would not appeal the customer which brings out e lasticity in demand in food consumption is elastic. Elasticity gives the degree that demand and supply curve respond a change in price is the curves elasticity. Elasticity changes throughout the products since some goods are more essential that customers have to purchase it, necessity goods whereas others are not, luxuries goods. In Sultan Traditional Kebab case food is necessity for consumers as people cannot live without nutrition but there are several alternatives if the price of the product does not a ppeal to consumers such as bringing something from home and substitute too.
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Substitute is the most significant element which affects elasticity of goods or services, practically more substitutes mean more elastic demand in the sector. Sensational Salad Sh op offers wraps which are similar to kebab and main substitute, also the price of wrap slightly less than kebab. Moreover sushi or sandwich are not similar to kebab but they are other alternatives that cost significantly less than kebab as a result from th is they have competitive advantage and effect on demand curve of kebab. Overall as we see in Sultan Traditional Kebab Shop case they has not change kebab price for four years because of competition, substitutes, economic recession elastic demand therefore it is not able to mark up its price significantly above marginal cost.
Factors of Production and Cost Analysis

As we mention before Sultan Traditional Kebab is a small medium enterprise as a result from this, factors of production diagram of it considerably simple to analysis compare to whether medium or large enterprises. Factors of production are inputs that are used in terms of production of goods or services such as labour, land and capital. Monitoring factors of production demonstrate how much inputs are used to produce goods or services as a result from this we can find out the cost of production by adding ot her expenses too. Sultan
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Traditional Kebabs factors of production are employees, materials to produce kebab (meet, chicken, lamb, lettuce, tomato and so on) and other materials (like coffee seeds, milk, some products for Turkish pastry Gozleme, Borek, sauces, chips, veggies etc) and shop.
(http://en.wikipedia.org/wiki/File:Circular_flow_of_goods_income.png )
The number of employees of the enterprise is merely four currently. Two of them are owner, Ibrahim Insel and his wife, Ummuhan Insel which gives them advantage in cost reduction; the other two are university students who have experience in fast food industry that increase efficiency of the work process, customer satisfaction which led to increase profit. The cost of employees is $ 550 per week and rest of them as follows (weekly)
Fixed Cost: Rent $ 2,250 Electricity $ 30
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Gas $ 30 Insurance $ 55 Tax 1,100 $ Registration $ 16
Total Fixed Cost : $ 3,481
Variable Cost: Labour $ 550 Material for production (lettuce, drink, meet, chicken, coffee seed etc) $ 3,100
Total Variable Cost : $ 3,650
Total Cost = Fixed Cost + Variable Cost

Total Cost: $ 7,131
http://www.investopedia.com/university/economics/economics4.asp
Fixed Cost Analysis

Fixed cost in our business is analysed as a recurring cost each month. The shop has a breakdown of the fixed cost. The highest expense is based on rent paid which is based on cost per square foot. The shop has contract with AGL suppliers for the electricity and gas bills. It has a locked contract with this company for a period of two years at a dis count rate of 10 %. The shop has contract with the insurance company named as Aon Corporation which is a principal provider of risk management services,
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insurance and reinsurance brokerage, financial planning, staff compensation and benefit solution. The company insurance program which covers the insurance related to the damage or the loss of the property which includes theft or robbery in the shop, dishonesty from the employees in the shop and the machine breakdown. The insurance also covers the public and product liability and loss revenue. The shop pays taxes which is goods and service tax based on the schedule 5 of the GSTR 2000/29. The shop also pays an additional tax to the federal government which facilitates revenue to the states to offset payroll ta xes. The shop also paid registration tax through the online company named Cleardox which lodged the form 201 with ASIC electronically. This tax includes certification of registration, constitution and other related documents.
Registration 0%
F xe C t
Tax 32%
Insurance 1% Gas
Rent 65%
1% Electricity 1%
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Variable Cost Analysis
The variable costs of the often fluctuates in the dollar and is generally dependent upon the procedures and controls placed on them. The main variable cost includes the labour charges and other expenses include food, paper, cleaning supplies and also the adve rtisements, utilities, administrative, material cost, payroll and other related costs. As shown in the chart below, 15% of the variable cost consists of wages paid to the labour. The employees of the shop are paid at an hourly rate of $17. A good wage to the employees help in keeping them motivated towards working & helping them in improving their productivity. The shops supplier for the Vegetables used in the making of kebabs are Harry farmers which is a local supplier located in Toowoomba, Brisbane.This supplier provides the shop on a weekly basis and provides transportation cost for the supply at a discounted rate.
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Variable C t
Lab u r 15
aw Material 85
Fixed Cost versus Variable Cost

The shop has more variable cost than the fixed cost because the fixed cost is not certain and is paid on a monthly basis for example the shop has not been purchased so the rent of the shop has to be paid every month.As the food shops in the Brisbane city are rented mostly,as the cost of purchasing the area is not reasonable.The shop has a rental lease agreemen t for a period of ten years and the rental price varies from year to year.

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T tal C t
Varia l e Cost 51%
Fixed Cost 49%
Macroeconomics
Macro environment basically means which influence the business but are out of its control which could be its decision making, performance and the strategies which company makes. This basically includes the economic factors, demographic factors, legal, poli tical and social conditions. Government regulation also plays an important role which macro environment influences. In business studies we basically Pestle and Pestel analysis to study macro environment. As macro economics deals with the studying of the economy as a whole. In comparison to many locations in Asia, Australia is been the lowest in political instability, Australia as a whole is ranked as third in the world for Political stability, which makes Australia a safer investment location. Australia is basically a constitutional democracy based on federal divisions of powers,
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being the oldest in the world democracies. Talking about the State which the business is operating is Brisbane, Queensland. Brisbane has record the highest percentage rate of popula tion growth as compared to all states since the year 1990.Brisbane sustained its population growth which in turn increased the opportunities for Jobs. In 15 years to June 2005 Official labour force data survey help us to know that increase in Jobs 56 perce nt. Australia basically being a federal parliamentary democracy, It is been an independent self governing state and a member of commonwealth nations. It has political parties in which there are four major political parties Australian labor party which has been quiet dominant party for a long period of time, the others are national party of Australia, the liberal party of Australia and Australian democratic party.
Local Government
There is a Bicameral system of government exists in each state except The northern territory of Queensland and the Australian capital territory which have only one house. In every Australian state there are hundreds of local government bodied are directly responsible for the local infrastructure. Then there are executive which have no powers in the government and just serves as a symbolic head of the state. Legislature and judiciary are also one of the parts of federal parliamentary democracy.
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The inflation rate in Australia was reported at 3.3 percent in the first quarter of 2011.From the year 1937 to the year 2010, the average inflation rate in Australia was 6.02 percent reaching an amazing height of 17.60 percent in march 1975 and record low of -0.30 percent in September of 1997.Inflation rate thus refers to general rise of price s measured against the standard level of purchasing power.
Inflation rate (consumer Year prices) 2003 2.80 % 2004 2.80 % 2005 2.30 % 2006 2.70 % 2007 3.80 % 2008 2.30 % 2009 4.40 % 2010 1.80 % 2011 2.90 % 129 124 68 74 108 50 71 67 82 Rank
Percent Change
Date of Information 2002 est.
0.00 % -17.86 % 17.39 % 40.74 % -39.47 % 91.30 % -59.09 % 61.11 %
2003 est. 2004 est. 2005 est. 2006 est. 2007 est. 2008 est. 2009 est. 2010 est.
The above data provides the annual percent change in consumer p rices in comparison with the last year's consumer prices.
Source: CIA World Fact book
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Reference List
http://www.investopedia.com/university/economics/economics4.asp http://en.wikipedia.org/wiki/File:Circular_flow_of_goods_income.png http://www.oktravel.com.au/au/qld/brisbane/brisbane/stats/ http://www.businessdictionary.com/definition/macro -environment.html http://www.tradingeconomics.com/australia/interest -rate http://www.australia-migration.com/page/Government/234 http://www.investopedia.com/university/economics/economics4.asp http://www.marketing-plan-success.com/articles/macroenvironment.php CIA World Fact book viewed from https://www.cia.gov/library/publications/theworld-factbook/fields/2092.html
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Sultan Traditional Kebab Shop

Economics for Managers CO5125:03

Karan Gupta-12513097 Ratandeep-12438188 Cigdem Ozdemir-12489140