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DISCUSSION AT URPERCENTILE : CASE STUDY - SETTING UP BUSINESS

M.Bansal, Ashutosh, Rajesh and Rani clear this GD .

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www.UrPercentile.com: Today we have case Study:
Mayank Bhim Anand (MBA) wants to start his own Snacks outlet business and has short listed following 4 locations to start his eating outlet.
1) A busy railway station with 5 platforms. Four platforms already have snacks outlet and he can start an outlet on the 5th platform.
2) A busy Cinema hall running 4 shows a day. The cinema hall has seating capacity of 1500.
3) A busy market area having lots of shops, factory outlets, restaurants and other things typically available at shopping area.
4) Near a big university area having around 5000 students studying there and an office complex nearby.
Where should MBA open the snacks outlet and why? What should be his Selection Criteria?

Abhishek: Friends, I believe Mayank should base his Judgment on four crucial factors:-
1) No. of people who would expectedly be his customers
2) Distance of that place, from his own residence
3) His would-be customers' conditions - like more pedestrians versus a road-side moving traffic
4) Future of his stall - how long he plans to stay in business.

Rajesh: Here MBA, who already has a hand-on experience in the restaurant industry, wants to start a Snacks outlet of his own. For this the first criteria is the availability of land or shop. And he has short-listed four locations. We now need to look at the various facets a shop should have for a snacks outlet.
1. Access to snacks consuming mass.
2. How long is the working hour or for how many hours the shop will be populated.
3. How skilled employees he has.

Shikhar: Well friends I think the basic option would be  near university will be the best the option. The reason is that snacks are consumed in a larger proportion by younger generation. Moreover every now days in colleges we have functions like fests n parties in which a lot of snacks would be required.

Ashish: After analyzing different options available at his disposal, I think to start with railway station will be best option. I would like to justify my decision by rejecting other options.

Ashutosh: Good evening friends. I think the topic given to us covers a very sought after area of business. These questions arise whenever we are moving ahead for any business. So, first we should see as to what should be the selection criteria’s for the decision. And, I propose these to be Demand, tentative no. of visiting people and location

M.Bansal: Good evening friends. I think the best place can be near university as in a busy market there is already restaurant and thus he will have to face with more competition. Moreover people going to malls prefer going to built in restaurant there or the food courts

Rani: Here what needs to be taken in to account while selecting location is the no. of available customers, working hours, how many of them would be regular customers. The railways station has already 4 canteens and he needs to run his shop 24x 7. So, College and busy market are the two best options in this regard.

Rajesh: Let us consider each option one by one. And to start with
1. Railway station which has access to people 24x7.
2. A cinema hall which has access to higher consuming people.
3. A market complex where again has access 2 higher consuming mass, but already has many restaurants.
4. A university which has access to students & staff’s for a limited time frame

Ashutosh: Now, If we go for location, we know that MBA will have to pay heavy taxes and in case of railways, it'll be the red tapism that can be hurdle, but if we see no. of people visiting it, then definitely railway and busy market have an edge over it. And, finally the demand criteria suggests that students and cinema hall will be the best suitable places.

Rani: So it has competition and positive thing is it has lots and lots of new probable customers, in coming to case of railway station already there are 4 platforms at which people have their buss in same line . So better he should not select that place to come in the competition . Then taking the case of hall and comparing between university and office market the benefit of having a snack bar is certainly more near university.

Abhishek: Yes, I agree with the railway option too because:
(1) It is an all-pedestrian area; hence there is greater propensity among people to stop-by,
(2) His customers would be anonymous,
(3) His customers would be all grades - children, women, old, youth, couples, so this he would surely get much greater revenue, then all the other three options combined.

Ashutosh: So, the question is how to optimize our selection. From our experience, we must have felt that students are really crazy about snacks especially when they are away from home as well as the cinema hall where we can see that almost all people enjoy having these snacks.

Rani: Other option is busy cinema hall, having capacity of 1500 people with four shows running so probable customers in a day are 6000. Now when you go for movie, you will have light snacks normally in a movie break but here people prefer pop corns and sandwiches and soft drink and ice cream more.

M.Bansal: As during the morning hours more of the office workers prefer taking there buses and afternoon meals . Beside his 5000 students in university will definitely  fetch him more number of students at his outlet.

Abhishek: But with the cinema hall, problem is that not many people come out of the cinema always, hence revenue may be much smaller

Rani: Third is busy market but again it has lots of competition with existing restaurants but it has advantage of having high propensity of people dropping in.

Shikhar: I agree with Rajesh that in case of university the shop would be accessed for a shorter frame of time by we should not forget that students form an opinion about nothing very fast and once they get into a habit of eating here and like the items they will come here all the time.

Rajesh: According to me he should go for the university area. As mentioned by my friend it has access to students & employees from the industry.

Rani: Fourth is university area with a business building located near. Here, he would have a regular customer base of around 5000 students if he serves good and comparative prices.

Abhishek: Yes, in a busy market, mostly only children/women would be his customers; and they also would not have come there just for eating out. Hence, most viable solutions are either University or railway station.

M.Bansal: Yes right, Moreover adding to Shikhar, i don’t think shop will be for smaller time as their are offices also. So, I think he can certainly go for more time as office are usually open till 7 and people at office quite a lot times want to have some evening snacks and besides this they ask their customers and clients  for small snacks so it will fetch him more orders and thus more amount of money.

Rani: Here I would think that university area is better option as normally younger people, students are the main customers of snack outlet, and they are crazy about snacks. Also students normally prefer to give out party at snack outlets as they can't afford expensive restaurants.

Abhishek: In a university, though mostly only students would become his regular visitors, and hence, much better revenue drawback - he needs to stay open until late night.

Shikhar: In case of cinema halls there is no guarantee the there will be house full all the time. In case of railway station pedestrians generally don’t prefer to eat costly.

M.Bansal: I think Abhi you didn’t read upon the clause that offices are also there. So there will be no pron for this case of opening and besides this office people are also into towards snacks not just for themselves but for their clients.

Rajesh: Bansal. Exactly, the university runs from morning 7 - evening 7 or more. And the office even runs for 9 am - 7 pm. So work time availability won’t be a constraint. And even students would reside around the university campus. And for food they may even go there 2 have food in the night.

Ashutosh: I take this not as a drawback rather an advantage which you can’t have in cinema halls and shopping areas due to government regulations. Through this, you can attract more revenue just by hiring an assistant for night.

M.Bansal: And besides this opening up near a university at times will help him when during the exam times people tends to stay more at there library and thus at regular intervals they free taking snacks from outside. Then not forgetting teachers in the university who also consumes snacks in their afternoon meals

Abhishek: That is right, he has better chance of revenue by working late night. However, in case of railway station, he can exercise his choice of doing business anytime of the day and still expect good income.

Ashish: A cinema hall is not a very bad option, however it has an almost fixed demand. It does have a better class of customers which means more profit per unit. Relatively it is not the best option. Now coming to busy market area which can be compared to first option, though he has to face a very tough competition since other substitutes and complementary products are available. Lastly when we look at a university place near to office complex on face this may seem quite attractive since it has a good demand and may have a good profit %. However when we talk about weekly offs and other national holiday it seems a bit avg. Proposal which on an avgerage May be monthly or quarterly he loses on quantity. Also it is not 24/7. ultimately best option available is railways one.
 
M.Bansal: As we see they ordered their food many times from outside and this will help him . And in a university of 5000 students certainly to meet the student ratio teachers will be in colossal

Rajesh: But there is one constraint he has to take into consideration with the university location. During the holidays like summer break & others, no student will come to university. Hence his biz will become seasonal. But he need not worry bout it so much as there are offices by the university side. So he could have customers from the office.

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Ashutosh: Yes, I agree that railway has same advantage of night working but don’t you think that railway is a bit risky and complex business due to its red tapism, we must have seen many cases where there are pending revenues from the government officials which make it a bad choice.

M.Bansal: I think my dear friends these days not much of the time it happens that university is totally close . Taking the hostels side many students don’t go frequently to their home and thus prefer staying at and will keep on consuming food from there.

Shikhar: I agree with Ashish that universities are not 24/7 but we should not forget that most employees and students prefer to live near there campuses and as I said earlier once the image is formed then they'll come to eat there only even if there have to cover some distance

Abhishek: That is true in case of railway station. So, we must take into account legal aspects as well.  e.g. how long would he be allowed to continue to have his stall on railway station w.r.t legal constraints, Univ. stall appears lucrative due to its decade long business viability.

M.Bansal: And at the railway stations as mostly it happens people don’t prefer taking foods due to the hygiene condition . As we all know that Indian railway stations are in such bad conditions a person opening a good snack bar can also not run away from such damaging affects

Ashutosh: The only disadvantage, I see with opening in the university is that of its business during holidays. This season is completely void for them. There are very few students residing which can make this period tragically for him and subdue its other advantages.

Rajesh: And further with railway station which has 4 out of 5 platforms already occupied by restaurants it would be a problem. And further the restaurants have already established themselves in that trend. It would be very tough for him to compete with them.

Rani: Here what we need to look at it, is there canteen located in university, if there is and if it serves snack as well then also I think a place outside university would be a cool place to hang out.

Ashutosh: There is one disadvantage with the cinema hall as well which is heavy taxes. If this is the case when there is no demand for the movie then that can again subdue its advantages

Shikhar: With the arrival of low cost airlines I think now even the middle class prefers to go by air than through railways. Now being an MBA I don’t think we can generate much revenue but just targeting lower class.

Abhishek: That is true Ashu that during vacations his income would plunge badly. Only solution to this could be that - Mayank be a better savings planner and with a University consisting of 5000 students compared with cinema's 1500 students, i think he can expect to accumulate enough money, which could balance his plunged income during vacations.

Ashish: Now talking specifically about railway platform :- it has demand 24/7, tough it has only one platform however he can expand or start a substitute outlet at other platforms, he can  always look for opportunities for supplying in trains through catering routes. Best part of the deal is he starts gaining from the very first day. He does not require marketing, since his customers are not permanent one's, total cash business.  

M.Bansal: There is not much of larger holidays in the university. University is in totality. There are many works going on besides the student’s activities. Even in holidays at time they are holding fest and many more extra curricular. At that outside students also come leaving people from university. So his business will not be in total disaster.

Rani: Here you are ignoring one fact that, the outlet when it becomes popular, it becomes a hanging out place and during vacations also ,student will hang out at that place and also it will attract teen-age crowds from city too.

Ashutosh: So, I must say that MBA must accumulate several data supporting and against each option then he should see the expected revenues from each by keeping worst case situations in his mind and then must optimize his decision.

M.Bansal: Moreover even in the opening time of university we can look for these functions that means people foots increase beyond 5000 at times this can be added advantage over his regular revenues.

Rajesh: Ashish. I would like to deviate from your statement a bit. Generally for providing through catering a tender is floated. And you have to win in the bid to supply. So MBA can’t have that advantage of supplying through catering route. But yes, he can employ his own employees to distribute snacks in the trains when they halt at the platform.

Ashish: Points rased by Abhi and Ashu are valid points though, even if demand fall it does not stops. Railways have all through rush, it may be moderate. Rajesh I do agree however I talked about scope and probabilities.

Rani: Abhi, the capacity of movie hall is 1500 and it runs 4 shows so it would be 6000 persons a day

Shikhar: Moreover we are just assuming that a university or an office is away from residential areas. Even are very active and they help in building image of a brand very quickly because they have a very large social circle.

Ashutosh: I agree with you Shikhar, I think we are keeping the worst situation in our mind and that is the location in some outskirts.

Rajesh: Ashish but the problem is totally ruled out. By chance if he wins the tender for catering, then he can even have his shop anywhere outside the platform.

www.UrPercentile.com: Request everyone to give a Concluding Statement of the Discussion.

Ashish: My conclusion stays with the mass for railway platform.

Rani: We have looked at railway station and university in detail but we are yet to discuss pro and cons of opening outlet in market area. Here advantage would be That lots of people who go for shopping almost stop for snacks outside so you will have more customer base compared to restricted ones like in cinema hall and university area and con is that you have lots of other competition from other snack outlet and also from restaurants which serve snacks.

M.Bansal: I think in above arguments an outlet near the university will be mere beneficial , as he can attract large number of students ,office members , people commuting at those , then besides this in case of university functions he can increase his revenues more . Moreover opening at railway there are lot of problems like to face already built competitions, then hygiene problems due to which people don’t take much of snacks and like going for packet food. So I think university is the best option.

Ashutosh: We had a very healthy discussion and I feel school is the best option due to its above average performance-if not best- in all the selection criteria’s put forward.

Abhishek: I would opt for University business because it has least
1) Legal problems,
2) Long term contract can be expected,
3) Students' emotional attachments can be tapped to improve his business.

Shikhar: I think being an MBA he should open a shop near a university and offices because there the revenue generation will be more as he has the requisites to attract students and other people keeping in mind that a large proportion of snacks is consumed by younger generation.

Rani: I think outlet at university will be more beneficial from all the 4 proposed sites because students normally use snack outlet as hanging out place and they will provide you a loyal customer base. Also it has office near by which will also increase its customer base. Also here customer base is not variable like in movie hall which depends on popularity of movie shown.

Rajesh: So as we all have discussed, the university area has many advantages like
1. Access to food consuming students & employees of the office.
2. As a place to celebrate parties.
3. Access to staffs of the university, and hence a permanent consumer source.
4. Students residing in hostel or mess would go to the shop and many others.
So because of these advantages the university location is the preferred one.

M.Bansal: So I think most of us have reached the consensus that it should be opened near university.

Shikhar: Yes I think we all agree to the fact opening a shop near university will give him more profit.

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