'Report on Carrebean Internet Cafe Case\r'

'REPORT ON CARRIBEAN INTERNET CAFE CASE assigning †1 CASE SUMMARY David ease up is an MBA student hoping to extend Caribbean net coffee shun in his homet hold Kingstons, Jamaica upon his graduation as he always wanted to be his own â€Å"boss”. Due to low availability and fashion of earnings in Jamaica, David vista of it as a good quantify to pursue this backup opportunity. He has self-collected data on all the relevant salute: equipment, rent, labor, etc. He has to a fault found a partner in the local telephone company, Jamaica Telecommunications Limited (JTL), where he previously worked.JTL has offered to provide equity and a long-term loan at affirmative interest rates. He is now face up with the task of analyzing the gathitherd information and making a ending of whether he should motivate with the venture, and if so, if it would be a profitable business organization for him and JTL. TABLE OF CONTENT CASE SUMMARY1 INTRODUCTION2 fuss DEFINITION3 im age feasibility STUDY3 TARGET MARKET4 LOCATION4 COMPETITION4 stinting FEASIBILITY4 CAPITAL AVAILABLE5 START UP COST5 mulish MONTHLY COST5 damage COST b readline ESTIMATION5 TARGET CUSTOMER part †200006 taxation PER YEAR6 PROFITABILITY6 CONCLUSION6 RECOMMENDATIONS7 INTRODUCTIONThe hide deals with the study of a business aim to circularise an lucre coffeehouse. The report studies the decision of David take into account who is an MBA student, to open Caribbean Internet Cafe in his home town Kingston, Jamaica. David while studying in capital of the United Kingdom visited a number of cafes and was intrigued by the concept. tour visiting his hometown Kingstons, Jamaica during summers he noniced that in spite of high awareness of the internet, there was low accessibility and usage of the very(prenominal). seeing a potential market of consumers, David decides to open a European concept ground Cafe which will offer brewed coffee, trade wines, juices and baked products .He decides to have iii demesnes in the cafe: a computing device champaign with booths, a wine lounge with thriving sofas, and a general cafe area with table and chairs. He envisioned providing the guests, a perfect vehicle to use internet and another(prenominal) do with by making an high-priced investment in computer hardware and in addition a favorable outlet where people provide crop together , listen to music or simply unloosen and socialize. He gathers the required information for starting the cafe and makes notes. business DEFINITIONAfter gathering all the information David let has to decide whether it will be a profitable and sustainable decision to open an Internet Cafe in Kingstons, Jamaica. CONCEPT FEASIBILITY STUDY In order to make a sound decision a feasibility study is carried out which will focus on analysing the target area market, location , the competitors in the area and the three categories of costs: Start up costs required to be invested in the business, flash-frozen monthly costs that are to be bore as result of trading operations and variable costs, that result with every customer visit to the cafe.TARGET MARKET It was assumed that chief(prenominal) particle that puke be targeted as the potential customers would be university students, who have computer knowledge and professionals with high disposable income as they would appreciate a venue where they could relax and socialize along with availing internet facilities. broad(a) segment size was assumed to be around 20,000. LOCATION Location that was elect for setting up the cafe was new-made Kingston as most of the banks, other financial institutions and corporate had their head offices in that area.Also this area consisted of hotels and shopping centre, which would mean much masses, would come to know about CIC. along with these factors, one more important lawsuit was that New Kingston was close to round(prenominal) affluent suburbs from which CIC could attrac t patrons. COMPETITION In Jamaica, internet accessibility and usage was low. in that respect were many reasons, that accounted for low internet usage such as 1) High cost of computer as percentage of number salary, 2) the lack of telephone lines in some areas of Kingston and,3)the high rates that was organism charged by the existing service providers.Along with these factors, the image of an” Internet cafe” was not very popular in Jamaica. So, this general plan was quite new for that share and as a result the challenger was not quite great. ECONOMIC FEASIBILITY CAPITAL AVAILABLE confuse [ 1 ] PARTICULARS| AMOUNT (JA$)| DAVID GRANT’S savings| 5,00,000| JTL INVESTMENT IN EQUITY (50% SHARE)| 5,00,000| bestow PROVIDED BY JTL @ 10% pa| 12,50,000| conglomeration| 22,50,000| START UP COST hedge [ 2 ] PARTICULARS| fit COST (JA$)| EQUIPMENT | 1426000| UTILITIY locate| 7000| ADVERTISING (Prior to Opening)| 20000|LEGAL AND DECORATIONS| long hundred000| TOTAL| 15 73000| placed MONTHLY COST There is an premise that loan from JTL in the startup is a 5 year loan with steer payable on maturity and 10% simple interest payable monthly. Table [ 3 ] PARTICULARS| TOTAL COST (PER MONTH) (JA$)| fight TO EMPLOYESS (90*40*4*2)| 28800| SALARY TO theater director | 40000| SITE RENTAL| 30000| TELEPHONE bill AND UTILITIES| 15000| INTERNET LINK RENTAL| myriad| INSURANCE PREMIUM| 10000| ADVERTISING, selling AND PROMOTION COST| 10000| administrative AND MAINTENANCE| 50000| INTEREST ON contri thate| 4167|TOTAL| 197967| YEARLY TOTAL (197967*12)| 2375604| legal injury COST MARGIN ESTIMATION PRICE/CUSTOMER (JA$) Table [ 4 ] PARTICULARS| TOTAL CHARGES| COST INCURRED| MARGIN (REVENUE)| INTERNET (PER HOUR)| 120| 60| 60| DRINKS (PER VISIT)| 140| 50| 90| FOOD (PER VISIT)| 60| 30| 30| TARGET CUSTOMER SEGMENT †20000 An independent research firm, commissioned by JTL, conducted a study and came to the conclusion that the estimates by the owner regarding target size and take were indeed correct.They also provided three scenarios of the demand that the cafe would attract. The market firm project tha , optimistically, 50% of the segment would visit the cafe, on an norm of , five sentence a year. A practical projection was that 40% of the segment would visit the cafe on an average of three times a year. Finally, a pessimist estimate was that 30% of the segment would visit the cafe twice per year. fall Customer Visits / Year Optimistic (50%, 5x/yr) †50000Realistic (40%, 3x/yr) †24000 bearish (30%, 2x/yr) †12000 REVENUE PER YEAR Table [ 5 ] PARTICULARS| OPTI MISTIC | REALISTIC| PESSIMISTIC| COMPUTER customs (40%)| 12,00,000| 5,76,000| 4,32,000| FOOD/DRINKS| 60,00,000| 28,80,000| 14,40,000| TOTAL| 72,00,000| 34,56,000| 18,72,000| PROFITABILITY * In optimistic scenario the cafe would generate a profit of 45263 JA$ * In realistic scenario the cafe would incur a release of 214737 JA$ * In pessimist scenario the cafe would incur a loss of 334737JA$ CONCLUSIONAfter analyzing the various aspects of the proposal it may be seen that the only scenario turning out to be a profitable and sustainable proposal is the optimistic one where the assumption is establish on the fact that 50% of the extreme segment i. e. 10000 of the total 20000 customer segment will visit the cafe on an average of 5 times a year. But it would not a practically advisable to go frontwards with such an assumption as the realistic as well as pessimist scenario shows a loss reflecting a negative hazard of the business macrocosm profitable and sustainable in the long run.But it has been mentioned that the area does not have a cafe which provides internet facility and at the same time a hang out reefer oblation snacks and music at the same place, which makes Caribbean Internet Cafe first of it strain in Kingstons Jamaica. Therefore scrapping the whole idea leads to loosing out on an opportunity which gives David Grantâ€Å"First Mov er Advantage” of offering a new experience to the customers. Secondly, a potential unexplored market which can be catered to by opening such cafe.Therefore David must proceed with his proposition but only after making certain(p) changes in the area cost and tariff. RECOMMENDATIONS * David should order his tariff of 120$ per hour considering the average charges of the internet facility is 90JA$ per hour. * Also David can reconstruct the menu of the snack bar as the offerings does not fits the demand of the local people and is adding to the cost due to being exotic in nature. Eg. It is clear from the exemplar facts that local people does not insobriety coffee and hence it may be omitted from the menu.\r\n'