David Brownies - Management Skills and Entrepreneurship

Title: Management Skills and Entrepreneurship

Abstract

Two aircraft engineers working for an airline have a penchant for baking and all things flour related. They have decided to partake in a small side business to test the market and see how far they can venture in the cut throat online bakery scene of Malaysia. Their product is brownies, and their company is David Brownies.

After receiving support from friends and family and taking into consideration of the extra time needed to fully participate in this business they have decided to pool their life savings and start. Making use of all the resources available around them they have also decided that this venture would take around 3 months to bear fruit.  This is the story of how they intend to start their business.

Introduction

David Brownies see an opportunity gap in opening an online brownies store with a free delivery service. At a glance there are only four or five online bakeries that offer full range services. Some offer only goods while others only deliver. We intend to eliminate that gap and give our customers the best brownies in town at the click of a button.

New Venture Concept

However huge gaps in the market must also be treated with caution. David Brownies believes there is a lesson we can take from Sainsbury’s in Egypt, it started in the year 1999 and pulled out in the year of 2001, we can agree that diving headfirst into a promising gap in the market does not necessarily guarantee success. Even though initial sales displays were promising, the eventual management issues, regulatory issues, training of manpower issues and more importantly the political issues it faced eventually succeeded in bring this multimillion Great Britain Multinational company to its knees. One can’t stress enough that the old adage of “if I can make it here I can make it anywhere” does not apply in this particular scenario.(Strategic Direction 2015)

The online bakery market is filled with competitors. Using the opportunity gap module we can identify that the high end high price market belongs to competitors such as Alexis Bistro, Marini’s at 57 and Ben’s at KLCC. On the other end with reflection on the high price low end market we can see a Secret Recipe (a famous Malaysian local lifestyle café chain), brownies that based on feasibility studies did not rank that high in terms of quality but still are exorbitantly priced. Hence we are more than confident that David Brownies are able to tap that gap in the market and tap the high end low price market. We believe that based on the cost we have estimated – we are able to serve high end Brownies at low prices.

Based on the financial feasibility conducted we have identified the start up capital required for David Brownies, for a 100 day initial cost we would require RM40,000.To simplify target we have estimated to have an average of 10 trays sold per day. To combat other competitors we have decided to offer a remarkable price of RM 70 per tray of brownies. This is a highly lucrative offer for the market as all other online and walk in bakeries would offer RM 150 per tray. The fixed and variable costs that we have identified both fall under Ingredients and Fuel. We have labelled both as fixed and variable due to most if not all of pricing conditions in Malaysia is subject to oil prices. We are also subjected to Government Service Tax compliance rule if sales exceed RM 500,000 however since David Brownies do not foresee the ability to penetrate that number within this foreseeable 3 months we shall not engage in the applications proceedings as of now. As mentioned earlier other costs such as shelving, downtime for production, customer engagement and feedback have been mellowed down by engaging in resources already available to us (home electricity, free oven and social media).

David Brownies targets an MYR 70,000 sale at the end of the 3 month period. Anticipated margins are as follows:

With every territory there are also financial risks involved. The Malaysian ringgit may fluctuate. Supply might exceed demand; there might be a lethal review in one of our online platforms that can affect business. Hence it is imperative that we identify and manage all of these risks head on or over the duration in order to best cure them and more effectively prevent them from ever occurring again in the future.

We at David Brownies are also more than aware of the importance of maintaining a constant size of profit over time. However, for contingency measures we are ready to close up if we are not profitable after a 100 day trial run. The MYR 40,000 that we are using to start up and run this business is purely from our own life savings and we do not have any angel investors nor have we approached any banks to apply for a loan. The reason is simple: we need to believe in ourselves before we can convince others to believe in us. Should we be able to proof ourselves worthy of making a profit after our hundred day run we would embark on an extended journey to approach investors but until then, we are all in it. Go big or go home.

Requirement for new business start up

David Brownies has decided early on that we will carry out a business model using an online bakery this would eliminate a huge amount of the cost as opposed to counter service bakeries, speciality bakeries and or sit down bakeries.

Among the first order of business is to purchase shelves to stack up the goods of the day, luckily for David Brownies we intend to keep a low target during the initial part of the business hence not that many shelves are needed. If this were an overseas business we would only need to keep all of the finished brownies in room temperature, however since this is a tropical country which receives an average temperature 36-39 degree Celsius- a refrigerator is needed.

Luckily for David Brownies we have been graced with a used 2 door Hitachi refrigerator with a 66litre capacity. We have also been fortunate enough to have been blessed with a used 66Litre Teka Hydroclean oven. The rest of the utensils have been either scavenged or found in the kitchen of David Brownies headquarters as is. This is in line with every business mantra to use their own money as much as feasibly possible to keep costs low when starting a business.

Secondly David Brownies would need to have a strong online base. As this is an online business David Brownies would have to capitalize all available online and social media platforms. An average cost to create a local website would be MYR999 for a professional layout. Subject to sales we shall ascertain whether this would be a professional requirement. As of current David Brownies would engage in all available free social media such as Instagram and Facebook- both are extremely popular to engage in online sales in Malaysia.