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RMIT International University Vietnam
ASSIGNMENT COVER PAGE
Course Code: BUSM 4092

Course Name: Applied Entrepreneurship Location where you study: Saigon South Campus Title of Assignment: Group Assignment File(s) submitted 1 Student name: Hoang Bao Chau s3298283
Vu Ngoc Thuy Bui Thai Han Pho Ai Hong s3324477 s3343702 s3296816

Learning Facilitator in charge: Mr Phillip Dowler
G4

Assignment due date: Jan 04 2013 Date of submission: Jan 04 2013 Number of pages including this one: 30 Word Count: 20 pages for the main content, 10 pages for Appendix and Table of Content

Lecturer: Mr Phillip Dowler Team: Unity Hoang Bao Chau Vu Ngoc Thuy Bui Thai Han Pho Ai Hong s3298283 s3324477 s3343702 s3296816

Group 4 - Semester C 2012

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Table of Contents
Executive Summary ............................................................................................................................. 3 A. I. II. III. B. I. II. 1. 2. III. 1. 2. IV. V. VI. 1. 2. VII. C. I. II. III. IV. V. VI. D. I. II. III. Business Idea ............................................................................................................................... 4 Opportunity: ............................................................................................................................. 4 Product and Service: .............................................................................................................. 4 Description of entrepreneur or team ........................................................................................ 5 Current industry: ....................................................................................................................... 6 Market potential for this industry: ............................................................................................ 6 PESTLE analysis: .................................................................................................................... 6 Porter’s Five Forces Model for Cake House................................................................................ 7 Competitor analysis: ............................................................................................................... 8 Direct competitors .................................................................................................................. 8 Indirect competitors: .............................................................................................................. 9 Target market .......................................................................................................................11 SWOT Analysis .........................................................................................................................11 Market penetration ................................................................................................................12 Online methods .....................................................................................................................12 Sponsors for famous singers’ fan meeting: ..............................................................................14 Stakeholder analysis ..............................................................................................................14 Revenue Sources (see Appendix 6) ............................................................................................15 Revenue models ..........................................................................................................................15 Cost drivers Analysis (see Appendix 5) ....................................................................................15 Resource requirements / mapping ..........................................................................................16 Investment size: ...................................................................................................................18 Critical success factors (See Appendix 8) ....................................................................................18 Financial Assumptions ..................................................................................................................18 Risk Analysis and Management ...............................................................................................20 Start-up Sources.......................................................................................................................21 Further information needed ....................................................................................................21 Support needed ....................................................................................................................22 Future Action Plan .......................................................................................................................21

The industry and market ............................................................................................................... 6

Business Models ..........................................................................................................................15

Maximum financing needs: ...........................................................................................................18

References .....................................................................................................................................23 Appendix ........................................................................................................................................24

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Executive Summary
The purpose of this report is to provide and analyze the business ideas creating a business to sell cup cake, ingredients and initial service to make THE OWN CAKE named Cake House. The report would be divided into 4 main sections which are business idea, industry and market, business model analysis and future action plan. Understanding customer’s insight, we realize that The first section, business idea would provide a brief description of the business opportunities to have the business, Cake House. Understanding customer’s insight, we realize that there are a large number of customers who desire to have a baking place, in order to fulfill their own baking habit or share that time with their lovers. The blueprint will provide thorough process of the main service which is self-baking, followed by the description of entrepreneur and key people in the business. The second section would represent for the current industry, potential market and market penetration strategy of Cake House. The impressive growth of baking industry encourages us to continue deeply exploring this business idea, which makes us later realize the huge potential market size of 1,847,280 people including mainly teenagers and young people from 13 to 20 years old. Besides, by analyzing the direct and indirect competitors, we can find the attributes we should concentrate on in order to make us differentiated from competitors. The third session is about the business model, related costs and revenue. Our business has the investment size of 339 million VND including the rent deposit, equipment, furniture and design, material and some other expenses in the initial month of establishment. The revenue is expected to increase 20% each year due to the implementation of marketing strategy therefore our business can attract a significant increase in the number of customers. After 5 year of operation, the net income achieved is quite high more than 1 billion. That proves there is a potential market for Cake House and furthermore the model of our business is feasible to apply in reality. According to the sensitivity analysis, when the business has different range applied in revenue and cost, there is a big variation in the net income at year 5 and it also affects the breakeven point and the ROI. Therefore, when the revenue has -20% range applied, the business is not feasible any more. The reason might be our business has multiple revenue streams however the revenue model is only based on Volume or Unit. Therefore, all revenue sources will change with the percentage of growth forecast every year. That might cause an inconsistent changing between revenue and cost. The next section is the business model which provides from general to detailed costs and revenue of the business. It also show how much the business needs to start its business in the investment size. The critical success factors and risk management are also provided in the last part of this section. The fourth section is the action plan which is required to show the sources of start-up capital, together with the benefits and limitation each of each source. With regard to further information needed and support needed of Cake House, we will share some uncertain information in establishing stage and some name of organizations and individuals we expect to cooperate with on the purpose of getting through those difficulties. Throughout the research and analysis of this report, although there are still many weaknesses and threats that we will be facing, our team, UNITY, confidently believes that the business idea and the whole analysis strongly demonstrate the feasibility of this potential business.

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A.
I.

Business Idea
Opportunity:

The typical feature of our shop is the combination between products and service (see Appendix 1). In Viet Nam, baking at home is still unpopular and most of the families do not have the ovens or the baking tools in their houses because the price of these tools are high and the traditional eating custom of Vietnamese is primarily boiling, steaming and frying (Nguyen 2012). However, recently, the demand of handmade cakes is increasing, especially in some big festivals such as Valentine, Tet Holiday, or Christmas, people like to make cakes by their own hands for their family, friends or lovers (Hao 2012). Therefore, the main service is providing a place where they can experience baking their own cakes with our tools and instructions. Moreover, from the complaint of many housewives and young girls on the online forums which is when they want to buy the ingredients for making cakes at home, they have to collect different ingredients from different places such as markets, super markets to online shops because there is not any one place which provides all the things they need (Kokotaru 2011). Furthermore, most of the time, customers have to buy in bunk while they only need a small amount for daily baking. Hence, recognized this gap in the market, beside the main service, Cake House will become an ideal shop for women who wish to have a place that sell all the basic ingredients for making cakes so there are a wide range of raw materials in our shop such as flour, butter, cocoa and chocolate which are packed with small quantities suitable for everyday baking in the family and the amount of each ingredient is estimated exactly in order to overcome the difficulties that the baker often face is to buy in bulk or find the material difficultly. As a result, according to the SCAMPER method of Alex Osborne, we will use Combine and Modify for our Cake House.

II.

Product and Service:

Our bakery is designed to meet customer needs when we provide a place where people can come and have fun when making their owned cakes under our instructions so customers can choose their preferred ingredients to creatively design their cakes. The shop does not merely focus on Western cakes such as birthday cakes or cupcakes, we also include the instructions of making Vietnamese cakes such as banh beo, banh gio or moon cakes. Customers only need to pay for the ingredients therefore even students who do not have much money to invest in the baking utensils can make their owned cakes. While providing a baking place is the main goal, we also offer two sub-services. Firstly, Cake House offer fresh and tasty Western and traditional cakes with all varieties and designs to serve as a model. In addition, we also have a colorful decorated room for people who merely come to enjoy a cup of coffee and a small cake made by us. However, since it is just our sub-service in order to fulfill various needs and take advantages of our capacities, the place for coffee shop will be fairly small. Secondly, as aforementioned, we will also sell raw materials which are packed in appropriate quantities. This is the Blue print for the main service which is self-baking
(Reproduced based on Wirtz, Lovelock & Chew 2009, Essentials of Services Marketing)

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W

W

W

F

F

F

Briefly, the blue print indicates 7 steps that customers experience if they choose self-baking at Cake House. Since our service is new, we recognize the importance of friendly consultation before customers officially join in the service, which is our first competitive advantage. In addition, by providing free drink, fun games and computers for customers while waiting for the cake cooked, it contributes to our second competitive advantage. The purpose is Cake House wants a new customer realize that we understand their needs and their insight. The blue print emphasizes the interaction among customers and our staff in the front stage and backstage with, following by the visible and invisible activities related to each stage. “F represents the failure and error in the delivery process, while W is waiting point where the customers must wait for during the service delivery” (Wirtz, Lovelock & Chew 2009). Although it is undeniable that it is not easy to fulfill all customers but making no small mistake, especially when the number of customers can be much higher at specific times, the blueprinting technique significantly discloses some possible problems that the managers can take back-up actions to eliminate failures and avoid complaint from customers.

III. Description of entrepreneur or team
Leadership is one of the most important tools of an entrepreneur which helps to maximize efficiency and achieve organizational goals (Lussier & Achua 2007). As four co-founders of the business, we want to turn our business ideas into reality effectively. In order to do that, we decided our mission and vision through three interdependent activities of leadership include determining a direction, designing the organization and nurturing a culture dedicated to excellence and ethical behavior (p. 379). We all agree to set the spirit of respecting each other’s, devoting and engaging into the work as our business’s core values. Since four of us from different bachelor programs, we can take the advantages from those skills. Han is a design student, so she will responsible for designing the store to make it attractive. Thuy is marketing student hence she will mainly be in charge of building appropriate marketing strategies to appeal customers, maintain customers’ relationship and balance the demand with capacities. Chau is an accountancy student, hence she is responsible for controlling the cash flow and manage financial source. Hong is commerce student, hence her role is as the manager who observe the overall activities, to ensure that everything is relevant, links with each other and runs smoothly. Besides the manager board, since we aim to empower the frontline staff, we RMIT University | Applied Entrepreneurship | Feasibility Report 5

realize that it is important to train them properly and motivate them by appropriate rewards. Besides staffs that are receptionists and consult customers in choosing service, the staffs who directly instruct customers to bake cakes must have specific skills in baking and able to help customers quickly solve any problems in baking process. Those staffs with professional baking skills will upgrade the service quality of Cake House.

B.
I.

The industry and market
Current industry:

The stable growth of baking goods industry encourages us to take the opportunity in this industry. As more people want to make desserts on their own, the service was created to provide them desired. Recently, baking industry’s development has grown considerably (Dan Tri 2011). Bich Nga (2007) stated in her article that there were around 100 bakery stores in Ho Chi Minh City. 80% customers in this city would pay 2.000-5.000VND for a cake. More than 70% customers are office staffs and civil servants who would pay 30-50% higher than the common price for a good cake. Additionally, according to Le Phung Hao, vice president of Kinh Do Bakery Company, admitted in Bich Nga’s article that there were many competitors in this industry and there will be more chains of stores continuously opened. According to Euromonitor International research, sales of bakery products grew higher than expected in Asia, which reached US$58 billion in 2009. This is greater than the previous year by 2% with bakery products remained strong in both value and volume. Vietnam is the most outstanding country with high emerging markets growth. With the rise of 48%, Vietnam markets proved to have strong value over the 2009-2014 periods.

II.

Market potential for this industry:

1. PESTLE analysis:
1.1 Political
Since Vietnam launched “Become New” campaign and opened its market to other countries, people’s quality of life has been rising. As a result, many people go to the next level of need: they do not only want to eat any more but they want to eat good food. After Vietnam joined WTO, the influence of western culture was stronger. Vietnamese people live a different lifestyle. Women do not spend all of their time at home but at work instead. Therefore, it is hard for them to practice and study baking by themselves. Furthermore, they do not always have the tools and ingredients to bake. This is where the industry started to grow (Dan Tri 2011).

1.2 Culture
Even though the cost of studying baking cake is expensive, the number of students is still increasing (VnExpress 2011). Specifically, the proportion of people wants to learn baking for the purpose of caring family, fulfill habit and skills counts for 42% of total people study baking. To explain this, Le Anh Tu – a baking teacher – stated the fact that Vietnamese

Figure: Reasons for studying baking cakes

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women know good food is an important factor to create and maintain a happy family so most of them want to maximize their cooking skills. He also gave an interesting point about the impact of a Korean movie called “King of Baking, Kim Tak Goo”. In his opinion, this baking movie motivated people to study baking. Furthermore, there are rumors of using disqualified ingredients and chemicals to keep cakes in good condition for a long time by many cakes vendor therefore in order to protect the family ‘s health, women want to make their own cakes for them.

1.3 Social
According to Kim Thoa (2012), people have many purposes to participate in this industry. Around 53% people saw the job opportunities in baking while approximately 42% took baking lessons for hobbies or to improve their skill as a wife. As for the reasons, Kim Thoa mentioned another research that asked people why they studied baking. In the research, 20% thought studying baking is a new trend. The business seems to have potential as many people desire it. Nonetheless, if they have the tools and place to cook, the chance of them using the service will be decreased. As technology develops, people could take online classes at home instead of going to another place. However, the economy is at crisis not only in Vietnam but also in the world. Many businesses in this industry had to lower the price so that people can afford it. Consequently, the profit would felt. Nevertheless, many people may not be able to buy tools to bake and have to use the service.

1.4 Economic
“Regional bakery product sales also benefited from the fact that the recent global economic downturn had less of an impact on Asia-Pacific than it did on Europe and the Americas” (Euro monitor 2012). Driven by China, India, Vietnam and Indonesia, GDP declined by 0.3% in contrast to a 2.2% global deterioration which means Asia's developing economies are rapidly recovering from recession. In baking industry, sugar is an important ingredient. The price of domestic sugar is higher than imported sugar. As a result, the businesses try to buy imported sugar instead of domestic sugar. Moreover, domestic sugar’s price is fluctuated which caused many problems for the businesses (Le Chi 2012).

1.5 Technological
As technology develops, there are advanced baking utensils greatly contributed to baking industry. They can help to shorten the time of mixing flour, stirring eggs and baking cakes. Also, we can make cakes in many different shapes, from small to large or from simple process (such as cookies, cupcakes) to complicated one (such as pateso, pizza) with the assistance of machinery. We plan to buy 5 ovens, 4 hand mixers and 1 stand mixer.

1.6 Legal
The business law 2005 has caused troubles to the business. The business law revealed its weakness from the business register stage. Because it has conflict with other law, the problem is not easily solved (Dang Huong 2011). However, according to the Department of Planning and Investment (2010), since Vietnam became a member of WTO, together with the impact of economic crisis, the government has changed the law to make small business apply their business license easier and more quickly; hence it takes five days to have a license.

2. Porter’s Five Forces Model for Cake House
Threats of new entrants: medium RMIT University | Applied Entrepreneurship | Feasibility Report 7

The capital requirements and switching costs are low and product differentiation is high Threats of substitutes: high

There are a high number of indirect competitors and each of them puts effort to offer customers various requirements (referred to competitor analysis part). Bargaining power of suppliers: medium

As my team has come to some supermarkets and markets such as Coopmart and Ben Thanh, we observe that the ingredients for cakes are always fresh and available, and we can get a good deal if we purchase with a large amount. Therefore although the supplier’s product is an important input to our business, its power is medium Bargaining power of buyers: low

It is emphasized that we bring the unique service, or it can be said that the service we provide is differentiated from the baking industry because what we aim at is not related attributes such as quality of cakes, but we focus on non-related attributes such as service quality and cake design, hence customers cannot easily find alternative suppliers. In addition, customers choose Cake House as they want to make the cakes for their lovers or fulfill their baking habit; hence what customers care is the design of cakes and joyful baking time, which makes them less price sensitive. Hence, their power is low. Rivalry among existing firms: low

Existing firm is not our threat since there are merely a few of them. The exit barriers are low and in fact, both direct competitors already concentrated on other subservices rather than self-baking. Evaluation: although the threats of substitutes are high, since there are not much threats from power of suppliers, buyers and existing firms, this market is potential.

III. Competitor analysis:
Overall, the reputable bakeries count for nearly 40% of total bakery market, especially Kinh Do as it alone takes 12 % of total market. The market share graph partially indicates the outstanding strength of reputable bakeries, but since Cake House’s main service sets apart from other bakeries, we must analyze thoroughly about other competitors in the baking industry. The following part will deeply analyze about the competitors in HCMC, which is our main geographic location.

1. Direct competitors
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They are those provide the similar service as ours and are our biggest competitors (see Appendix 2)

1.1
-

-

Description: this is the combination of 3 types of business: coffee shop, restaurant and entertainment. The theme of this place is about a witch town as Harry Potter stories. Bakery called chubby bakery is a part of this town where customers can make their own cakes based on 20 recipes. Advantages: Applied creative idea about witch topic, create a fantasy environment. By creating a “witch” society, they build a consistent relationship with customers.

-

-

Disadvantages: The prices are high compared to purchasing power of their target segments (teenagers and young adults). Although they are the pioneer about homemade cake, they focus on not only bakery but also other businesses, hence the space for bakery is limited and also the cake choices.

1.2 Loving cupcakes
Description: A well-known cupcake shop is Ho Chi Minh City. Besides selling cupcakes, it provides the service which is about writing the favorite words on the cupcakes and making the required cupcakes. Especially, customers can decorate the cakes by themselves Advantages: The shop is decorated with cozy and cute theme, brings customers a warm and close feeling. The prices are affordable. This is the only cupcake shop in HCMC which offers the special service of cake decoration. Disadvantages: Small space. Customers cannot involve in the whole baking process, they are just allowed to decorate the cake so customers cannot have the full experience of baking. There is also only one kind of cake so customers have very limited choice.

2. Indirect competitors:
2.1 Baking Training Centres: (example: Baker Love Center)
- Description: Professional baking centers teach the students various kinds of cakes and provide ensured certificates after each course. - Advantages: The center provides professionals trainers and facilities; students can learn many different kinds of cakes. - Disadvantages: When they choose a baking center, they know that they must learn seriously and the outcome must be acceptable, therefore people cannot have “fun” time in a training center. The tuition fee is fairly high and it takes them months to complete a course.

2.2 Small cake shops: (example: Pacy, Fly cupcake, Donut world etc.)
Description: cake shops which location space is small to medium. They are also coffee shop so people can buy some cakes and enjoy with a cup of coffee at the cake shops. Advantages: affordable prices and various cute cake designs. The cozy shop design brings a wonderful place for customers to spend time with their beloved people at the shop. Disadvantages: they focus on just some kinds of cake such as cupcake and donut. Customers cannot involve in the baking process so they cannot make their own.

2.3 Online cake shop (example: Little bossy girl Cake shop and Woa!!Cake)
Description: customers can book different cakes with their favorite cake design. Advantages: Customers are free to design their cakes and the bakers will make them exactly as customers require, so each customer still have their own cakes which connect to their memorable RMIT University | Applied Entrepreneurship | Feasibility Report 9

events. Acceptable price. It is also convenient as customers just need to call and confirm their requirement, when the cake is completed, it will be delivered free to customers. Disadvantages: Customers need to wait for at least one day to have their cakes. They merely sell online so customers cannot come to a real shop to look at its products. There can be fake online shop so the quality of cake is not guaranteed.

2.4 Famous bakeries (example: Tous les jours, Kinh Do and Brodard)
Description: Popular domestic and international bakeries maintain stable growths over years, provides various kinds of cakes, especially birthday cakes. Advantages: large investment brings available suppliers with ensured quality, professional bakers and modern facilities. Cakes with affordable prices, positive reputations, good quality and professional service quality. Disadvantages: There are merely some classical design of cakes so the cake when customers give to their friends as a gift is similar to many other cakes, which means they cannot transfer the meaning into the cake. The size of birthday cake is usually large, which is overloaded if a couple or just some friends eat it. Evaluation: Based on the aforementioned analysis and the competitor analysis table (See appendix 4), our Cake House mostly focuses on four dimensions to differentiate our service, which is service quality, store decoration, design of cakes and additional service to provide fun and relaxing time. In other words, we want to train the staff carefully so they can serve customer professionally, bring customers a satisfied service quality. Since customers can design creatively their cakes, we gain that benefit to make Cake House different. Compared to most of competitors such as baking training centers, famous bakeries and small cake shops, while they do not invest on the store decoration, Cake House will do opposite way to attract customers. Last but not least, Cake House wants to mark a great impression on customers’ mind, hence we know the importance of creating a fun and relaxing time when they go to Cake House, it should not just a boring and serious time in training center, it is not just about drinking coffee and enjoy cakes as small cake shops, customers have the rights to enjoy entire fun time of baking cakes, which is the feeling that Cake House wants to give them, hence they will “repurchase” our service and become loyal customers.

Positioning map

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IV. Target market
HCMC urban population: 6,157,600 people (AC Nielsen 2012), since 30% of them from 15 to 30 years old, therefore the estimated target size is 1,847,280 people. We expect to serve 40% of them, which is about 739,000 people. Segmenting Variables Geographic Age Demographic Income Occupation Social Class Subcategories Benefits and limitations from customers Benefits: - Since they are young, they are willing to try the new service, especially those bring them unique experience and easy to access. - They expect to have a place where they can enjoy fun time with their lovers or friends - Once they love a favorite place, they will quickly share with their friends and the place can easily go viral without spending much for marketing. Limitation - They always change their preference and desire for new and exciting things. - Since they tend to discover new experience, they can easily switch to other competitors and not be loyal customers.

Target Segments and their preferences Urban citizens in Ho Chi Minh city Teenagers and young adults from 13 to 30 years old Females who are interested in baking, or to make a cake for their beloved people Males who want to spend time with their lovers Students (junior and senior high school, and university), gold collar and white collar, young housewives Lower and middle class Makers who “are motivated by self-expression”. Strivers who “trendy and fun loving, concern about the opinion and approval of others”. Experiencers who “are young, enthusiastic and quickly become enthusiastic about new possibilities”. By providing the excitement of baking experiences, the Homemade cake can attract Experiencers as they love discovering new experience. Strivers will enjoy the service since they prefer following a new trend which is preference of young people. Since the key point of homemade cake is making the cake by yourself, the Markers can greatly express themselves. In addition, as they have interest in what lies inside family and lovers, a cake which is transferred their love to their beloved people is an outstanding choice. Youthful, enthusiastic, caring, romantic, thoughtful Weekend, Valentine’s day, women’s day, Christmas, international new year day. Those who desire to make cakes for their beloved people as a meaningful gift, those who are interested in cooking and fulfill their baking hobby.

Psychographic

VALS

Personality Occasion Behavioral Benefits Sought

V.
-

SWOT Analysis
Strengths Weaknesses Lack of practical experiences for running a business Lack of financial sources Lack of money for wide advertising It is hard to source employees who both have

Well-trained staff Attractive store decoration Various sub-services to fulfill various customers’ needs Unique baking service

Provide customers unique experience, which stands -

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out from any other competitors Management team with various skills in design, marketing and accounting fields Young team with energetic spirit Creative ways to reach customers and penetrate the market Opportunities The stable growth of baking industry Customer trend for fresh cakes Customers’ willingness for paying a worthy service. Food quality is noticeable issue in Vietnam, and consumers worry about the hygiene and safety of products, which encourage people to make cakes by themselves to ensure the quality of cakes Young customers enjoy experiencing new things Collectivism cultures make Vietnamese people tend to care about others, especially their family, lovers and friends Advantages from social network like Facebook Negligible effect from economic recession Improvement in baking utensils Due to Vietnamese cuisine culture, people do not usually have a baking machine at home. -

bakery skills and customer care skills Financial risk from cash flow Lack of money to recruit skillful staff

Threats Registration regulation Sugar import issue High threats from direct and indirect competitors (substitutes and new entrants) Easy for new entrants to enter the market to duplication and substitution Target segments are not usually loyal and easily switch to other competitors Degradation of technology Disqualified ingredients Misbehavior by employees Employee theft. Unfamiliar suppliers.

VI. Market penetration
Since we are new firms, it is important to spend money on advertising. However, Cake House is a small business and we mainly focus on HCMC Urban citizens, since newspapers are published throughout Vietnam, which means nearly 80% of them cannot be our customers; it can be useless and costly if we widely use printed advertising on magazines and banners on online newspapers. Moreover, according to the report about HCMC vs HANOI Understanding consumer differences by AC Nielsen 2011, only 6% of Saigonese sees and be affected by advertisement, which emphasizes the unnecessary of spending much money on printed advertising. Therefore, we consider online channels as our main penetration way and we mainly focus on the channels which we directly reach our customers, instead of spending million VND to put banners on online newspapers. These are various methods to make potential customers aware of Cake House:

1. Online methods
1.1 Facebook:
Description: A Facebook page named www.facebook.com/Cakehome will be created. Information will be updated daily such as promotion programs, the photos of decoration and facilities in Cake Home store and

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the photos of cakes made by customers. The some small contest will be raised weekly to catch customers’ attention. Qualitative explanation: The increase in the percentage of Facebook users between Q1 2012 and Q2

2012 was 55%, which ranks number one in Asia (TNS 2012). Teenagers and young adults count for nearly 70% of Facebook users, which are exactly Cake House’s segments. It should be mentioned that people can easily access to Facebook with their mobile phone. When a FB user “like” Cake Home photos or new post, it will appear in their friends’ update, hence there will be many people can reach the information of Cake House. Quantitative analysis:

+ Reach: We expect to reach 100,000 visitors on Facebook (from 9.1 million Facebook users in the total population) = 0.001098% + Frequency : It is estimated that 50% Cake house target customers use Facebook daily, 30% access weekly and 20% access monthly, the frequency in a month would be : [(50*30) + (30*4) + (20*1)] / (50 + 30 + 20) = 1640 / 100 = 16.4 From those calculation above, the Gross Rating Point = 0.001098 * 16.4 = 18.02 Since it requires no cost to create a Facebook account, the GRP equals 18.02 can be an ideal reach.

1.2 Private website:
Description: we will make an official business web-page to provide basic information of Cake House such as overview of Cake house, map to the location, service menu, prices and promotion programs. In the future, we also build up booking online service if necessary. Qualitative explanation: although it can cost us much money to create and maintain an official website, “in the eyes of a consumer, having a website is a measure of viability, of stability” (Mobley 2012). Customers might not consider our business as serious if they cannot and even downgrade the remaining of the business. Furthermore, at the beginning stage when there will be not many reviews about our Cake House in social forums, the official website is the only tool (besides Cake house facebook page) that customers can find more information. Cake House also pays for Google search engine to ensure our website will initially reveal when customers search related keywords. Quantitative analysis: it is estimated that the cost for creating, designing and maintaining a website is

about 8,000,000 VND a year. The cost for search engine key words is 6,000,000 VND a year (Google search pricing 2012). Total is 14,000,000 VND.

1.3 Group-buying
Description: We will corporate with Nhommua.com to offer customers Group-buying. Cake House will Qualitative explanation: Group-buying, which is renowned as collective buying, “offers the services and offer 50 Group-buying vouchers which can apply for every types of cakes on Valentine’s days. products at a lower prices when a number of consumers together purchases it” (NSW Fair trading n.d) and it is considered as win-win situation with both buyers and sellers. The buyers can experience the service but with much lower prices, while the sellers take the most advantage of marketing costs. Moreover, especially at Valentine’s days, many couples will surf the internet to search for new and exciting place to enjoy the special day with their lovers, there is a high proportion that the group-buying will appeal them – which is our right target segments. RMIT University | Applied Entrepreneurship | Feasibility Report 13

-

Quantitative analysis: The price offering in the group-buying voucher needs to be 30% less than the real

price, and we have to pay for Nhomua.com 30% of the prices. The price of a big birthday cake is 220,000VND (with instructors), after reducing the compulsory fee, the price that group-buying voucher offer is 88,000VND. Cake House offers 50 vouchers, the total price is 11,000,000 VND.

2. Sponsors for famous singers’ fan meeting:
Description: Cake House will sponsor for 10 fan meeting events in HCMC of 10 singers such as Noo Phuoc Thinh, Ho Ngoc Ha, Bui Anh Tuan and some singers from Vietnam Idols and the Voice Qualitative explanation: Since these three singers are extremely famous with Vietnamese young people,

which are our direct segment, if the singer has a fan meeting in Cake House, the photos taken on the event day will widely spread among the singers’ fans. Moreover, online newspapers such as Kenh14.vn or Zing.vn will write about the event and the pictures of Cake House will appear on those teenage online newspapers “for free”. On the event day, singers and their fans will bake cakes with creative shapes and give it to their singers as special gifts, hence they will absolutely have a great time together. Quantitative analysis

+ Reach: it is estimate that there will be 100 fans attending the fan meeting. The photos of event will be uploaded on singer’s facebook, hence nearly other 50,000 other fans will see it. There will be about 100 of them “share” the photos on their own FB and 1000 of their friends will know about the Cake House, therefore the estimated number of people from 10 fan meeting events see the photos of Cake House: (100 + 50,000 + 100 * 1000) * 10 = 1,501,000, and 60% of them live in HCMC -> Target market reach = 900,600 / 1,847,280 = 48.8 % of target market pay attention to the Cake House. + Budget: 100fans will together makes 2 big birthday cakes, 40 cookies, 24 cupcakes and 10 donuts = 150,000 VND * 2 + 50,000 VND * 2 + 70,000 VND *2 + 100,000 VND * 2 = 740,000 VND, add up with 100 cups of smoothies = 2,000,000 VND, total = 2,740,000. However, the money for ingredients and other fixed costs just account for 60%, hence the actual money spending is just 1,644,000. The total cost for 10 fan meetings: 16,440,000 Overall, the total prices for penetrating the market: 14,000,000 + 11,000,000 + 16,440,000 = 41,440,000 VND

VII. Stakeholder analysis
Functions Customers Employees Buying the services,  Represent for the ingredients and business finished products of  Serve customers the business High The most powerful factor to make the business alive by its power in consuming. Investors Providing capitals/investing moneys/allowing the business to borrow money Medium The investors would give a change for the business to keep going on and the ability to compete to the competitors Vendors Supply materials, tools, etc.

Value to Venture

Level of influence

Medium They directly serve and work with the customers who come to the shop. Their attitude and behavior would affect to the come-back of customers High Medium Low Individual customer Though the number of The

High The suppliers would supply us the best quality materials and on-time orders with the better prices compared to markets

influence

High of The

reputation 14

of

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Tactics to imitate relationship

is not really influenced but an amount number of customers would be much more influence to the business. Doing advertising, marketing strategies to get closer and aware from potential customers

people are looking for a job is high in the market, we also try to maintain the current staffs because of the costs of recruitment and training Providing reward program to encourage and motivate employee working fully Having the policies to protect the employee right in the business

investors are not really affect to the business performance because they are not shown in the business activities On-time paying the interests

suppliers also help us to gain the awareness and acceptance from the customers and markets Building the relationship with supplies Try to do on-time payments Being supporting to suppliers when they need help

C. Business Models
I. Revenue Sources (see Appendix 6)
Cake House collects revenue from three different sources. The main service is baking service which customers are experienced baking their own cakes under our instruction. Beside, our shop is also a supplier of ingredients and common baking tools for customers who want to make cakes at home. Finally, Cake House provides some various fresh cupcakes for customers to enjoy with their friends when they are waiting for their cakes are baked or they can bring them home to enjoy with their family. As a result, our Cake House has multiple revenue streams.

Revenue models
With our service and products, customers have to pay a fixed price per unit for example with baking service, customers will choose what kind of cakes they want to make and then they pay a fixed amount for certain kind of cake. After that, we will provide them the ingredients and instruction for that kind of cake. Besides, we sell ingredients and common tools for making cakes at home and customers have a wide range of selections for ingredients such as chocolate, almonds, vanilla …and they pay a fixed price per unit they choose. With cupcakes, customers have to pay from 10,000 VND to 30,000 VND for each unit of cupcakes. Therefore, although our cake shop combines between service and products, we use only volume or unit based for our revenue models.

II.

Cost drivers Analysis (see Appendix 5)
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Cake House spends a great amount of money on renting, materials and payroll expense. The location of our shop is on Nguyen Trai Street in district 5. It is a very crowded street with many clothes shops so it is an advantage for our advertising activities because there is a certain amount of customers travel on this street every night to buy clothes. Therefore, they could recognize the existence of our shop from a distance due to our special design so we might not need to wait until the implement of advertising on some media tools is effective. Furthermore, we need to spend on materials for customers to make cakes. The primary materials we use for traditional and western cakes here are flour, sugar, eggs…so they cost us a large amount of money each month. Finally, we focus on customer satisfaction therefore we will spend time and money to train our staff to have adequate skills to serve customers. Also, we want our staff to have enough salary to cover their monthly payment to reduce the employee turnover so we pay them higher than that in general market. Our cake shop doesn’t spend too much on the fixed costs. They only includes two-month rent deposit, initial purchase of equipment and furniture and design fees which cost 60 million VND + 53 million VND + 100 million VND = 213 million VND in year 1. However, with 5 ovens (1 big and 4 small) and many pans and pots, we expect to serve maximum 100 customers a day. 1 customer may cook averagely 1 hour , we operate from 9am to 7pm so we could have 10 times of customers, and we also have 5 oven so our capacity for Western Cakes are around 50 customers a day and the same for Traditional cakes. The rent expense usually increase 10% each year however our purchase of equipment can used for quite a long time. They might be broken or damaged after 2 or 3 using years so we might buy some more equipment at the beginning of year 3. These primary costs are not changed so much because we have the 5 years renting contract with the landlord so the renting expense cannot increase higher than 10% each year. Materials required are the most unpredicted changing items because they are the mix of many different types of ingredients and each ingredient has different sources. Therefore, there are many reasons for one kind of ingredient increases price a lot while the others just grow a little. And also, payroll expense is not expected to increase higher than 10% each year because in the critical time now most of employees know that it is very difficult for business to pay salary higher than 10% each year.

III. Resource requirements / mapping
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ype Knowledge

Label Statistical data in bakery industry. Deeper research how to apply baking service effectively. Start-up capital, operating capital

Source Search on the Internet Advice from people in the industry.

How to Acquire Internet Famous bakery in HCM city.

Responsibility Four partners

When Start from now

Priority This is the first step to start the business because the knowledge about the industry in which the entrepreneurs want to is very important. This is the second activity because we need to make sure that we have enough capital to run the business for the initial period before staring the business because most of the business will get loss in the first year. After financial resource, human resource is also important factor in our business.

Financial

Four investors, two will take part in day-day operation, two only be investors

Four partners will source money from their saving or family or relatives by show them our business plan or our feasibility report. Announce Recruitment on newspaper or some websites about finding jobs

Four partners

From now to 30th March 2013 Begin on 1st April 2013

Human

2 bakers, 3 normal staffs

Physical

Raw Material

Equipment for baking. Materials to make cakes. Some tables, chairs and shelves to display cakes Flour, eggs, butter, milk, sugar, cream, meat, green beans…and others.

From Saigontourist College or other Hospitality college in HCM city to recruit bakers. Normal staffs can be recruited from many different sources. Baking utensils are bought at Dan Sinh market Materials from different suppliers Furniture is on Ngo Gia Tu street

Thuy will be in charge of Human resources.

Go to buy furniture and Four partners baking utensils directly. Materials can be ordered through phone.

From 1st April 2013

This step can be processed at the same time with the recruitment

Suppliers in Ben Thanh market and some shops selling imported products in HCM city

Go to market to buy for the first time and order through phone from the second time.

Hong, Operating manager

On 15th April 2013

This is the last step in the preparation process before opening Cake House.

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IV. Investment size:
Maximum financing needs:
The initial investment of Cake House in equipment is not much only around 53 million VND and the purchase of tables, chairs, cake shelves and design fees are about 100 million VND however we need to pay for the two-month house deposit which is 60 million VND and the rent for the first month which is 30 million VND. Furthermore, the electricity, water expenses as well as materials and common tools to sells for customers in the first month which equal 64 million VND, payroll and marketing expenses in the first month are expected around 32 million VND. Therefore, our initial investment should be equal 339 million VND. Our initial investments is not too much, however, according to the cost template, we have loss in the first year so we should not only prepare in advance the initial investment. Instead, we should prepare further amount to store the materials in advance and also for payroll expenses. The amount of loss in the first year is around 81 million VND which means around 7 million VND each month. It seems not to be a big loss, the reason might be we provide self-made cakes service for customers so although we have a small number of customers in the first year, we set a high price and still collect a large amount of revenue because we don’t have many competitors to compare prices. Only Three brooms village has the same service however it is only one small section in their business so the types of cakes are limited to some cupcakes and birthday cakes.

V.

Critical success factors (See Appendix 8)

Our revenue model is only based on volume or unit therefore the ability to attract customers to use our baking service and buy our cakes and baking tools will directly affect our revenue. In order to be highlighted by customers in self-baking service, we need to have professional bakers to instruct our customers and create a relaxing environment which is not as serious as a normal baking class for them to have fun time with their friends. Furthermore, beside customer service, in order to gain trust from customers to be sustainable and profitable in a long time, the quality of ingredients is very important because the high quality materials will create the superior cakes therefore we have to source materials from well-known brand name suppliers. On the other hand, the ability to achieve a high price for service/products without an increase in cost is also important. Fortunately, our investment in equipment can be used for maximum 100 customers per day however in the first year, we predict that averagely only 20 customers will use our baking service therefore we have more than enough capacity to serve customers. Hence, in the future when the number of customers increases, we only need to invest money on buying more materials not equipment.

Financial Assumptions
General
All the revenue streams are expected to increase at the same level by 20% annually while the cost is assumed to increase 10% year by year. The reason is due to the regular promotions and marketing strategies in the first year, there is a significant increase in numbers of customers from the second year. Furthermore, our capacity is to serve 100 baking customers however in the first year, we only have 20 customers a day. In the tools and ingredients revenue stream we can store more than the quantity needed to sell for 20 customers a day in the first year. And also the ingredients to make cupcakes are quite simple and they don’t take much time to make therefore we can generate many more than just 40 cupcakes a day. About the cost, for the rent, electricity, water, payroll and marketing, those expenses are not expected to increase more than 10% per year while the materials, tools and ingredients cost might be changed more than expected.

In revenue
In baking service, when we first start our business, not many customers know about our special service which customers can make their own cakes therefore we predict to have a very few customers in this stream in the first six months. However, after several months of implementing our marketing strategies, the number of customers in this stream will increase significantly due to the unique service. Then we will have about 10RMIT University | Applied Entrepreneurship | Feasibility Report 18

15 customers per day in the last 6 months and at the weekend or in festivals the number of customer can be up to 20 or 30 per day so averagely each day in the initial year we have averagely 20 customers come to make cakes, haft of them make Western and the others haft will make traditional cakes. The average prices of Western and Traditional cakes are calculated from our Menu which are 122,500 VND and 155,000 VND respectively (see Appendix 3). In ingredients revenue stream, Cake House have very little competitors in this field because there are only one or two shop in Ho Chi Minh City which sells all the ingredients and common tools needed to make cakes. Therefore, each of customers come to our shop will buy not one but some items required then the average amount they will spend is around 50,000 VND for one customers. And again, at the first time, nobody knows us however we will gain more after several months of establishing and the average customers in this section in the first year is also around 20 customers a day. Therefore, we intend to gain 360 million VND in ingredients revenue a year while we spend 60% of the total amount for the supplier which is 360*0.6= 216 million VND. Last but not least, we also provide beautiful cupcakes for those who want to enjoy and have fun time with their friends while they are waiting for their cakes being cooked. We don’t target on selling cupcakes because our main purpose are to induce our customers to make their own cakes and to sell ingredients and common baking tools for them to make cakes at home. Therefore, they are only some kinds of fresh and tasty cupcakes with different design and sizes for customers to enjoy at our place or bring home. We choose cupcakes because they are very beautiful and easy to make so even customers just come to our shop to have a look they will be definitely attracted by our cupcakes and willing to make some like that. The price of each cupcake will range from 10,000 to 30,000 VND so the average price is 20,000 VND. And we also expect to sell 40 cupcakes a day in the first year, some for those who enjoy while waiting for their cakes and some for those who want to take home.

In cost drivers
We intend to get the long-term leasing contract for 5 years to prevent the risk that the landlord can take back the property or increase the price higher than expected. The general price for the two-floor house with 4 square meters width and 12 square meters length on Nguyen Trai in District 5 at this time is 30 million VND. The required initial equipment for baking Western and traditional cakes will not cost too much because we only need some ovens, mixers, pans and pots which could be purchased from Dan Sinh market, the famous market for kitchen equipment with the price is somehow lower than in the supermarket or shopping Centre with the same quality. Therefore, we predict to spend about 53 million VND for the purchase of initial equipment. About the materials for cakes, we guarantee to use the high quality ingredients to protect customers’ health therefore our selected suppliers have to be direct importers therefore we will choose the shop Lan Trinh on Ham Nghi street to buy Newzeland butter and high-quality milk. Shop Cuong Dung on 114 Cong Quynh street District 1 for many kinds of flour, sugar and shop ChauMuoi in Ben Thanh market for other ingredients. They are all high quality and certificated suppliers which have many years in the bakery industry so we can have a trust on them. Hence, the total amount of materials we use for customers to make cakes at our store and also we make cupcakes to sell to customers are about 480 million VND in year 1. Furthermore, the ingredients and common tools to sell for customers to make cakes at home cost 216 million VND in year 1. We have 4 co-founders however in order to reduce the salary payment in the initial year, only 2 of us will be involved directly to the day-to-day business activities. Furthermore, we will accept the salary 4 million VND a month, equal the salary of the bakers, to maintain the payroll expense. Our tasks are not only to control the business, manage the inputs and outputs but also observe the staffs in order to ensure that they do their job efficiently. Our Cake House also needs 2 bakers from Western and Traditional styles who will show the customers how to make their cakes and 2 staffs to help the bakers serve customers such as to take the ingredients or guide them to use the ovens or mixers or look after the other customers when the bakers are introducing to the others on the second floor. And one more staff to sell ingredients and common tools and also take cupcakes when customers order at the first floor. Our target is customer satisfaction therefore the attitudes RMIT University | Applied Entrepreneurship | Feasibility Report 19

of staffs with customers are very important therefore in order to raise the awareness of the staffs, we will pay them 500,000 VND higher than the currently general salary per month in the bakery market which are usually 3,500,000 VND for pastry chefs and 2,500,000 VND for normal staffs. Furthermore, we will hire 4 more part-time staffs at the weekend and in the festivals because the demand of customers in these days is expected to be extremely high. Therefore, we need 2 more staffs to help the bakers to instruct customers and 2 more staffs will help to sell the ingredients and cakes in the first floor. The total day per year we require part-time staffs is about 120 days which includes 96 days of weekend and many days of festivals such as Valentine, Christmas and Tet, and they are expected to work for 8 hours and the payment for 1 hour is 12,000 VND. Hence the total cost spends on part-time staffs are 4*120*8*12,000=46,080,000 VND a year

VI. Risk Analysis and Management
Numbe r Risk Impact Conse quenc e major Likeliho od Ris Risk Treatment k Lev el extr - Borrow money from families and eme friends - Borrow money from banks - Have agreement with suppliers to make payment later Low - Choose the machines belong to well-known brand - Regularly maintain the facilities - The instruction clearly shows how each facility use, hence customers will use it in the right way hence customers will not “accidentally” break it. Med - Make a check list of standard ium criteria required for ingredients, ensure that all ingredients are checked carefully - Calculate carefully the expected ingredient for a period to buy the appropriate amount of ingredients - Buy ingredients weekly instead of monthly High - Carefully recruit employees, give them time to try the job then decide whether their personalities fit the job - Have reasonable reward for the staffs who receive compliment form customers - Organize training classes every month to improve skills for the staffs. Skillful staff will train the new staff. Low - The broad manager needs to check the transaction note every day. - If the case happens, immediately have a meeting and let every staff freely share their opinions - Have clear policy about the punishment for any such case happens Resi dual Risk High

1

2

Financial Risk (not enough cash flow to buy ingredients or payroll) Degradation of technology (obsolete equipment)

Lack of ingredients especially in peak time such as holidays

likely

Affect the quality of cakes, the time of making cakes. Complaint from customer, destroy reputation

Minor

Possible

Low

3

Disqualified ingredients (Quality of ingredients does not meet standards, such as it can be out of date)

Customers can get food poisoning, the scandals can easily go viral and negatively affect our reputation

Moder ate

Unlikely

Low

4

Misbehavior by employees (Employees do not follow the script in greeting customers, instructing them to make a cake or receiving payment, which can annoy customers) Theft (Staff may steal cash from counter, or staff who manages the ingredients may purchase less than the actual amount needed hence he/she can steal money from that)

Since improving service quality is always our initial goal, the issue can downgrade our competitive advantage.

Minor

Likely

Medi um

5

The daily revenue cannot match the cost and the numbers of customers, can create suspect among good staffs and bad staffs

Minor

Unlikely

Low

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D.
I.

Future Action Plan
Start-up Sources

Our team plans to use three main sources including personal savings, investors and bank loans. Firstly, it is apparent that we should use up all of our own savings, hence its advantage is we do not need to pay interest as we are required for a bank loan. However, we should be conscious that if the business goes wrong, we can lose all the money. Secondly, since we are young so our personal savings are negligible compared with the huge investment required for the new business, hence we really need the support from investors, exclusively our families and friends. With the help from our families and friends, we can raise extension capital for our business without suffering all the burden of loss on us alone. Since they are our relatives, they also can be our active partners as they can give us useful advice in the business rather than merely providing capital and waiting the returns. The drawback of this source is we actually give up a certain component of our control over the company (Jennings 2010). Although all the investors are our close friends and families, we still should have a specific plan to call for their help. We should understand our investors’ motivations and highlight them when we present our business idea in order to persuade them and make them believe in this potential business. We “make the pitch in person but follow-up with a written business plan” (Kuratko n.d) hence there will be no regretful misunderstanding. Although they are not strangers, since we want to show them the professional work style, we will also prepare a thorough promissory note. It can be said that we appreciate the help from our friends and families, but we still have some criteria to decide whether they are suitable investors for us to receive their help. They should have excess capacity and diversified in activities, therefore we are one part of their actions and they will not only fully depend on our success (Kuratko n.d). In addition, since they will be active partners, they should obtain the experience or specialized skills to understand the business vision. Last but not least, bank loan is also an option, but it is not preferable. We are a small firm and all of us are just under-graduated students so our fixed asset cannot be enough for banks to allow collateral loans. We also have to pay interest on the loan. Furthermore, our payments will be “due on time regardless of whether business is bad or good” (Jennings 2010). Although the third choice is optional, we still need to prepare answers for some questions in case we will need the support from a bank, including showing how secure our venture is, the amount of money we need and the proper time we can pay back.

II.

Further information needed
Evaluation The way to achieve - Look at the forums about shop - This information source is always available and cost no money Work will be done quickly, reach satisfaction but expensive. They provide credible advice Since they are famous training bakery, they can keep many information as secret so we just can reach limited information

Needed Information

Cake House decoration: How to decorate Cake House in the decoration to find the most best way to create a warm and appropriate combination comfortable environment? - Find a furniture company and let them decorate as our requirement Tools: Which could be the good tools/machines to use for bakers? What brands should we buy? Suppliers: The exact list of suppliers who supply ingredients with good quality Tan Nhat Huong Training Bakery provides online support to find the good and suitable tools for bakers

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and reasonable price Customer’s experience: To know about the customer’s perspective about Cake House and their first time experience with Cake House if possible Staff: From which channels we can find the skillful staffs? How can we train them? Have the useful feedback to improve the service. Since they are our friends, Ask our friends to be our we can ask them to specify any vague customers, then write feedback comments provided in the feedback about the service - Our friends cannot represent the whole segment, hence we still lack many possible evaluation for the service Post the announcement on some - Guaranteed about the highly skilled famous job-seeking websites. staff Ask Tan Nhat Huong Training - Take time and money Bakery to suggest some candidates from their training centers Hire famous bakers from famous bakeries to train the new staffs. Contact -

III.
Areas of need of support

Support needed
Relationship Expertise provided
Evaluation

Individual/ Organizatio n name

Khanh Toan Cake House design Xinh Furniture and Interior Company

Friend expert



Design

An experienced designer who would help to design a friendly environment for cake house, as well as brochure, and posters for Cake House. Firstly, we ourselves will work with Toan to come up with the design and Xinh Company will help us to choose the appropriate furniture.

Since he is our friend, we can be discuss freely about our thinking of his design, and easily modify it as we want We can reduce the cost for consultation from Xinh Company but still buy the nice furniture from this company. Regarding to the marketing cost, the money spending for the official websites is quite high, hence since we ask our friend to help us, the cost for this tool can be reduced She can give us many useful advice about finding ingredients and suppliers. She also can give advice about the trend of customers, so we can have the appropriate strategy to serve customers. Since they used to teach us, they can know our strengths and weakness, therefore recommend suitable advice. Additionally, they are experts in management and marketing, especially they have global views, they will give us exclusive and useful solutions

Agency

Website designer

Son Hai

Friend expert



Design

He will help us to create a new websites, update news and information about Cake House and maintain the website. A baking expert who will help with baking recipes and potential problems may occur in the baking process.

Baking

Linh Trang

Friend whose family has a small bakery

Business management

Mr Phillips

Entrepreneurship teacher

Marketing

Mr Melvin

Marketing teacher

Provides idea of how to manage the business well and what to do if unwanted troubles happen to the business. Advice about appropriate marketing methods, gives comments about the effectiveness of each methods and how to improve.

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References
ACNielsen 2012, ‘2012 Pocket Reference Book: Vietnam’, ACNielsen, Vietnam AC Nielsen 2012, ‘Vietnam Consumer Pulse’, February. Banxai 2012, ‘Trai nghiem cung Thi Tran Ba Cay Choi’, Dia diem an uong, discussion forum post, posted 8 July, th viewed 21 December 2012, th Bich Nga, 2007, “Time of cake”, Vietbao, Saigon Tiep Thi, viewed 13 December 2012, st Chat A Thinh, n.d, ‘Dich vu tu lam banh tang ban, nguoi than – DO IT YOURSELF’, Chat A Thinh, viewed 21 December 2012, rd Chérie House, n.d, viewed 23 December 2012, th Dantri, 2011, “Cake industry - An economic sector with high potential in Vietnam”, Dantri, viewed 13 Dcember 2012, st Dinh Lien 2011, ‘Thich thu vua an vua lam banh tai: Tiem banh tinh yeu’, afamily, 20 January, viewed 21 December 2012, th Dang Huong, 2011, “Business law: Difficult in both birth and death”, Vneconomy, viewed 13 December 2012, Euromonitor International 2011, ‘Bakery Retail Performance in Asia Pacific and Australasia’, EuromonitorInternational, st 13 April, viewed 21 December 2012, Business Searching Interface (EBSCO) database. Euromonitor International 2010, ‘Asia Pacific bakery products increasingly reliant upon emerging markets’, st EuromonitorInternational, 24 May, viewed 21 December 2012, Business Searching Interface (EBSCO) database. th Hao, L 2012, Banh homemade hut khach, Vnexpress, 13rd November, viewed 8 December 2012, rd Jennings R., n.d, ‘Sources of Finance and Their Advantages & Disadvantages’, Chron, Demand Media, viewed 23 December 2012, nd Ha Nam, n.d, ‘Thanh lap moi doanh nghiep tu nhan’, Ha Nam, viewed 22 December 2012, th Kim Thoa, 2012, “Trend of baking study today”, daynghebanh, Tan Nhat Huong Corp., viewed 13 December 2012, Kuratko, D, nd, Introduction to Entrepreneurship, 8th Edition, South-Western Cengage Learning, U.S.A th th Kokotaru 2011, Mua nguyen lieu lam banh tai Kokotaru, 25 May, viewed 8 December 2012, th Le Chi, 2012, “Domestic sugar’s price can’t be cheaper than imported sugar’s price”, Vnexpress, viewed 13 December 2012, Lussier, RN &Achua, CF 2007, Effective Leadership, 3rdedn, Thomson South-Western, Ohio. st LovingCupcakes, n.d, ‘Chao don ban den voi LovingCupcakes!’, LovingCupcakes, viewed 21 December 2012, th Mobley, D. 2011, ‘The Importance of a Website to Your Small Business’, Advertising in Depth, 7 February, viewed 20 December 2012. th th Nguyen, NN 2012, Cach an uong cua nguoi Viet, Amthuc, 18 April, viewed 8 December 2012 th Ngan Ha, 2012, ‘Luong nguoi dung Facebook o VN tang truong nhanh nhat chau A’, Dantri, 20 July, viewed 20 December 2012, th st Tuan Minh 2012, ‘Co chu nho cua tiem banh Kokotaru’, VTC, 9 April, viewed 21 December 2012, th Vnexpress, 2011, “Hot trend: girls study baking... before marriage”, Giao Duc Vietnam, viewed 13 December 2012, Wirtz J, Lovelock H & Chew P 2009, ‘Essentials of Services Marketing’, Pearson, USA.

-

-

-

-

-

-

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Appendix
Appendix 1:
Business idea: I had a backpacking tour in Singapore in 2 years ago when I saw a baking shop that sold only baking tools and ingredients and very convenient for those who like baking regularly. When I returned Viet Nam, it is very difficult to go to many stores to buy the materials and tools used when baking. And my dream is one day I own the store which has all the baking ingredients and utensils so people who love making cakes do not have to run back and down to collect all the materials. And when coming to our bakery, customer can also see people baking, decorating cakes and asking about the baking cakes jobs. Appendix 2: Competitors Three-bloom town (Th tr n ba c y ch i)

Loving cupcakes

Online cake shop (example: Little bossy girl Cake shop and Woa!!Cake)

Baking Training Centres: (example: Baker Love Center) Famous bakeries (example: Tous les jours, Kinh Do and Brodard)

Small cake shops: (example: Pacy, Fly cupcake, Donut world etc.)

Appendix 3: Menu & Prices

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Appendix 4: Competitor Analysis Table
Weig ht Homemade cake (expected) Service Quality Price 4 4 Threebloom town Loving cupcake Baking Training Centers Small cake shops Online cake shops Famous bakerie s

3

3

2

2

2

4

3

2

2

3

1

4

4

4

Store decoratio n Quality of cake Design of the cake Modern facilities Fun and relaxing time Overall

5

5

5

4

3

4

1

3

3

2

3

3

5

4

4

5

3

4

3

4

4

4

5

4

2

2

3

2

4

3

3

5

5

5

4

4

2

3

2

2

94

87

89

71

85

68

85

Appendix 5: Cost-driver Western Cakes Flour(kg) Egg (unit) Milk (liter) Sugar (kg) Butter (kg) Traditional Cakes Rice flour (kg) Corn flour (kg) Meat (kg) Mushroom (kg) Green beans (kg) Banana Leaves (kg) Quantity/Customer Number of Customers/day Total quantity/day 0.5 10 2 10 0.3 10 0.2 10 0.2 10 Quantity/Customer Number of Customers/day Total quantity/day 0.5 10 0.2 10 0.3 10 0.2 10 0.2 10 0.2 10 5 20 3 2 2

5 2 3 2 2 2

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Year 1 Cost Increase Forecast Fixed cost Rent Rent deposit Machinery Furniture and Decoration Varible cost Electricity Water Materials 48,000,000 24,000,000 479,880,000 360,000,000 60,000,000 53,000,000 100,000,000

Year 2 -10% 396,000,000

Year 3 -10% 435,600,000

Year 4 -10% 479,160,000

Year 5 -10%

Month in year 1

527,076,000 30,000,000 (calculated below)

52,800,000 26,400,000 431,892,000

58,080,000 29,040,000 388,702,800

63,888,000 31,944,000 349,832,520

70,276,800 28,749,600

4,000,000 2,000,000

(calculated 314,849,268 39,990,000 below) (60% of tools and ingredients 18,000,000 revenue) 63,990,000

Tools & Ingredients

216,000,000 194,400,000

174,960,000

157,464,000

141,717,600

Semi-Variable Payroll-expenses Marketing 346,080,000 41,440,000 (refer to market penetration) 380,688,000 45,584,000 418,756,800 50,142,400 460,632,480 55,156,640 (calculated 506,695,728 28,840,000 below) 60,672,304 3,453,333 32,293,333

Non-recurring Purchasing more equipment TOTAL 30,000,000 1,728,400,000 1,527,764,000 1,585,282,000 1,598,077,640 1,650,037,300

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Materials Western Cakes

Items All purpose Flour (kg) Egg (unit) Milk (liter) Sugar (kg) Butter (kg) Others

Total Quantity/ day 5.0 20.0 3.0 2.0 2.0

Price

Total/day 20,000 100,000 2,500 50,000 18,000 54,000 18,000 36,000 50,000 100,000

Total/month Total/Year 3,000,000 1,500,000 1,620,000 1,080,000 3,000,000 36,000,000 18,000,000 19,440,000 12,960,000 36,000,000 36,000,000 158,400,000

100,000 3,000,000

Traditional Cakes

Rice Flour (kg) Corn Flour (kg) Meat (kg) Mushroom (kg) Green Bean (kg) Banana leaves (kg) Others

5.0 2.0 3.0 2.0 2.0 2.0

18,000 18,000 80,000 40,000 20,000 10,000

90,000 2,700,000 36,000 1,080,000 240,000 7,200,000 80,000 2,400,000 40,000 1,200,000 20,000 600,000 100,000 3,000,000

32,400,000 12,960,000 86,400,000 28,800,000 14,400,000 7,200,000 36,000,000 218,160,000 14,400,000 9,000,000

Cupcakes ( For 40

Flour (kg) Egg (unit)

2.0 10.0

20,000 2,500

40,000 1,200,000 25,000 27

RMIT University | Applied Entrepreneurship | Feasibility Report

cupcakes per day in the first year)

750,000 Milk (liter) Sugar Butter (kg) Cream (liter) Items to design 2.0 2.0 1.0 1.0 1.0 18,000 18,000 50,000 50,000 50,000 36,000 1,080,000 36,000 1,080,000 50,000 1,500,000 50,000 1,500,000 50,000 1,500,000 12,960,000 12,960,000 18,000,000 18,000,000 18,000,000 103,320,000 479,880,000

TOTAL Salary of each/Month 2 2 3

39,990,000 Total Total salary/Month salary/Year 96,000,000 96,000,000 108,000,000

Number of staffs Payroll expenses executives bakers staff

4,000,000 8,000,000 4,000,000 8,000,000 3,000,000 9,000,000

staff (in festival)

4

We will hire 4 part-time staffs in the weekend and in festival days such as Valentine, Christmas and Tet Holidays. 46,080,000 Assume there are 120 holidays/year We pay them 12,000 VND for each working hour. Assume that they work 8 hours/ day. So we have 12,000 VND * 8hours 346,080,000 *120days *4staffs= 46,080,000 VND

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Appendix 6: Revenue sources
Year 1 Growth Forcast Volume or Unit based Baking service Ingredients Cakes Total Year 2 20% Year 3 20% Year 4 20% Year 5 20%

999,000,000 360,000,000 288,000,000 1,647,000,000

61% 22% 17%

1,198,800,000 432,000,000 345,600,000 1,976,400,000

61% 1,438,560,000 22% 518,400,000 17% 414,720,000 2,371,680,000

61% 1,726,272,000 22% 17% 622,080,000 497,664,000 2,846,016,000

61% 22% 17%

2,071,526,400 61% 746,496,000 22% 597,196,800 17% 3,415,219,200

IN YEAR Baking 1 service

Number of Customers/day Western Cakes 20 10

Average price 122,500

Traditional Cakes 10

Average Price

Total Amount /Day

Total/ Month

Total/Year

155,000 2,775,000

83,250,000 999,000,000

Tools & Ingredients

Number of Average Total Customers/day price/customer Amount/Day Total/Month 20 Numer of cakes/ day 50,000 1,000,000 30,000,000

Total/Year 360,000,000

Average price 40

Total Amount/Day Total/Month 24,000,000

Total/Year 288,000,000

Cakes

20,000 800,000

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Appendix 7: Investment
Y1 Y2 1,976,400,000 2,371,680,000 Y3 Y4 2,846,016,000 Y5 3,415,219,200

Revenues
Total revenues 1,647,000,000

Costs
Total costs Net Income Acc. C/F * figures quoted in Vietnam Dong 1,728,400,000 (81,400,000) (81,400,000) 1,527,764,000 448,636,000 367,236,000 1,585,282,000 786,398,000 1,153,634,000 1,598,077,640 1,247,938,360 2,401,572,360 1,650,037,300 1,765,181,900 4,166,754,260

Net Income EoY
2,000,000,000
1,500,000,000 1,000,000,000 500,000,000 (500,000,000) 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000,000 (1,000,000,000)

Accu. C/F EoY

Appendix 8: Critical Success Factors
The total revenues and costs will changed based on the sensitivity changes to either/both revenues or/and costs

RMIT University | Applied Entrepreneurship | Feasibility Report

30

Y1

Y2 20% 0% 20% 1,976,400,000 10% -20% -10% 1,527,764,000 1,585,282,000 2,371,680,000

Y3 20% 20%

Y4 20% 20% 2,846,016,000 3,415,219,200

Y5 20% 20%

Revenues
Growth Forcast Sensitivity change Adjusted growth Adjusted total revenues change here 

1,647,000,000

Costs
COGS - paper Increase Forcast Sensitivity change Adjusted Increase Adjusted total costs 10% -10% 10% -10% 1,598,077,640 10% -10% 1,650,037,300 change here 

1,728,400,000

Net Income Acc. C/F

(81,400,000) (81,400,000)

448,636,000 367,236,000

786,398,000 1,153,634,000

1,247,938,360 2,401,572,360

1,765,181,900 4,166,754,260

* figures above quoted in Vietnam Dong * figures below quoted in Million Vietnam Dong Sensitivity Analysis Revenue sensitivity -15% Net Income End of Y5 Breakeven ROI Cost sensitivity Net Income End of Y5 Breakeven ROI -217 Q3/Y2 ? -40% 2,061 Q1/Y2 Q1/Y2

-5% 662 Q2/Y2 Q2/Y2 -20% 1,765 Q1/Y2 Q1/Y2

0% 1,197 Q1/Y2 Q2/Y2 0% 1,197 Q1/Y2 Q2/Y2

+5% 1,802 Q1/Y2 Q1/Y2 +20% 221 Q2/Y2 Q3/Y2

+15% 3,252 Q1/Y2 Q1/Y2 +40% -1,320 Q4/Y2 ?

RMIT University | Applied Entrepreneurship | Feasibility Report

31

For revenue: when the revenue range applies -15%, the business will achieve break even point in Q3/Y2 and also Q3/Y3 then starts decreasing. However, the accumulated cash flow will always be negative and can not achieve break even. Furthermore, If the revenue has -20% range applied then the business will not be feasible. For Cost: if the cost applied 40% increase , the net income can achieve break even point in Q4/Y2 then grows up slightly and drecreases slightly to meet the break even point again in Q1/Y3. After that, it continues to dcrease. However, the accumulated cash flow, the same as when the revenue has -15% range applied, always decreases. Revenue -15% -5% 0% +5% Cost -40% 648 -20% 352 0% (217) +20% (1,192) +40% (2,734) 1,526 1,231 662 (313) (1,855) 2,061 1,765 1,197 221 (1,320) Example for Net Income after 5 years 2,667 2,371 1,802 827 (715) 4,116 3,820 3,252 2,277 735

+15%

The business can achieve very high net income in year 5 such as when the revenue has 15% range applied and the cost applies -40%, the net income will be around 4 billion VND at the end of year 5. On the other hand, it is easy to get loss even when the cost range applies 0% and the revenue has a -15% range applied, the business still get 217 million VND loss.

Net Income EoY
2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 (500,000,000) 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000,000 (1,000,000,000)

Accu. C/F EoY

RMIT University | Applied Entrepreneurship | Feasibility Report

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