Developing a New Business

Developing a New Business

4MBS670

4/5/2011

University of Westminster

From: Tahir Abu

To: Martin Guedalla

Word count: 3991

Rise on Mersey

Table of Contents

Executive summary 3

Management 4

Legal and Tax 4

Market research leading to USP 5

Detailed Segmentation and Competitor Analysis with the USP 7

Demographic: 7

Geographic: 7

Psychographic: 8

Behavioural: 8

Competitive analysis 9

Swot analysis 9

Sales proposal (promotional mix) 11

Flyers 11

Personal selling/Free sampling 12

Social network marketing 14

UK Facebook Age and Gender Split 15

Financial proposal 16

Conclusion 17

Appendix 1 18

Appendix 2 19

Executive summary

The business has taken out a loan for £50,000 loan from an investor; this will be paid back within 3 years with an interest rate of 30%. I will be investing £60,000 of my own capital generated through family members.

The purpose of this report will be looking at if Rise on Mersey a coffee shop would be successful in Liverpool city. The report will be exploring a detailed segmentation analysis, and analyse if there is a suitable target market. The unique selling (USP) for the business is that it will be launching herbal/fruit teas for which the market seems very weak due to the consumer perceptions being negative.

Management

The management team will consist of an assistant manager employed on a full time basis to take care of the operational side of the business for example contracts with staff and suppliers. A full time sales assistant will be hired along with part time sales assistant on a 16 hour contract to work short hours during the day and weekends. I will be the store manager dealing with promotions and marketing activities, along with offering my help on the shop floor.

Legal and Tax

Rise on Mersey will be operating as a limited liability, most small businesses such as Rise on Mersey set up as limited companies. The term ‘limited' derives from the fact that the company's finances are distinct from the personal finances of their owners (unlike the sole trader arrangement). There are additional requirements such as registration, filling annual accounts and completing annual returns to Companies House.

HM Revenues and Customs will have to be notified of any profits or taxable income along with corporation tax. For each worker at Rise on Mersey, by law must be accounted for Income Tax and NICs via the PAYE system. The tax and National Insurance law does contain some special rules that do not follow the normal principles of case law and apply to certain categories of worker in certain circumstances, so if Rise on Mersey decides to hire cleaners from another company then there will be an exemption on paying taxes.

In accordance with advice administered by the Health and Safety Executive we will commit to maintaining a safety checklist in order to avoid any injuries and accidents, while we will also follow their exact instructions in order to best ensure we achieve the required licenses.

Market research leading to USP

TGI data show that around 57% of consumers now use coffee shops: around 47% sit in compared to 8% who choose to take away. Usage has only increased by a small percentage over the last few years, with sit-in growing at a faster rate than takeaway. Age impacts usage as those that sit in tend to be older consumers and third age/retired, whilst takeaway drinkers tend to be aged 15-34 and pre/no family.

Visiting coffee shops is a well-established habit amongst consumers, with many seeing it as an affordable regular treat which is also driven by consumers' continuing demand for convenience products. There are of course some struggles for coffee shops as the cost of raw ingredients are rising. According to Mintel one of the main concerns for coffee shops is that they have lost the unique selling point, Coffee shops are losing their USP as non-specialists continue to focus on improving, and expanding their own hot drinks ranges: whilst around a quarter of consumers have visited Costa Coffee or Starbucks in the last three months, some 15% have chosen to a hot drink from a fast food/sandwich shop (e.g. Prêt a Manger, McDonald's).

Mintel research has also shown that over the last few years' coffee shops have seen a drop in sales of speciality/herbal tea, currently only 4% of users have ordered them in the last three months dating from February 2011, compared to 50% who have ordered a cappuccino/latte/mocha.

Rise on Mersey's objective is offering customers great tasting herbal/fruit teas; this will be the main unique selling point of the business. There has been a steady decline in ‘standard' tea sales, this can be put down to the fact that due to an ageing user base and a failure to resonate with younger consumers. There are other problems facing herbal/fruit teas, Mintel's consumer research shows that the vast majority of standard tea drinkers consume standard "English" breakfast tea, which has a loyal solus user base of consumers over-35, C2DE men. This may be an obstacle for Rise on Mersey to overcome as this group seem to be dismissive of Herbal/fruit teas as the flavours may not be of satisfactory quality and a lack of interest in the health benefits they have to offer.

FIGURE: Food/drink ordered in coffee shops, December 2010:

Base: 1,353 adults aged 15+ who have drunk tea, coffee or another hot drink out of home in the last 3 months (from Feb. 2011)

Source: Ipsos MORI/Mintel

Detailed Segmentation and Competitor Analysis with the USP

Demographic:

According to Liverpool city council the population of Liverpool in the 2009 mid-year estimates stands at 442,300 being the 8th largest city in the UK. According to 2001 census data Liverpool has a population 177,948 that fall into the 25-54 age category which is roughly 40% of the Liverpool population. This is the potential target market for Rise on Mersey. Liverpool's employment rate is 60.2% (June 2010) and 176,300 working age residents are in work. Liverpool's household income for 2010 stood at £29,285 which indicates that there is disposable income.

There are problems Rise on Mersey face when looking at the data for the target market, 14,445 Liverpool residents claiming JSA are over the age of 25.

Geographic:

Liverpool is full of culture and excitement and an important maritime history. Liverpool is well known for its Mersey waterfront; Liverpool has recently redeveloped many areas and now boasts unrivalled architecture. Rise on Mersey will look to start the business in Liverpool's city centre, which is also within close proximity to the University of Liverpool, the revamped trendy Albert Dock, which is especially appealing and comes complete with museums, cafés, bars and shops.

Liverpool has become appealing to many with the emerging tourism industry, Liverpool is also known throughout the world for being the home of the famous rock band, The Beatles. It is also home to two famous football clubs Everton and Liverpool FC. The city centre has fantastic transport links, buses, railway station (part of the Mersey rail network), also John Lennon airport situated 8 miles away.

Psychographic:

Liverpool residents have below average earnings, Liverpool's residents have a low median annual pay compared to average national levels, but also compared to the other Core Cities. The residents also seem to have a lower average pay compared to the national average this could be put down to people are not going into higher level education and the jobs with the higher salaries are being taken by people coming from outside the city. Secondly the income levels are lower due to the high level of economic inactivity which is widespread in the city.

Behavioural:

According to Mintel half the UK population prefer to drink coffee in coffee shops, although