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Establishing a Bakery in Kakuma, Kenya

Executive Summary

Business ideas are the driving force to economic growth and development in all regions. Establishing a business idea into a successful business venture needs a careful consideration of the risks, advantages, market gaps and the resources available. Kakuma, a refugee camp and town underserved with these important commodities, from the bakery industry. Establishing a baking industry in Kakuma will be an important step towards bridging this gap. Steps and considerations in every step towards a successful venture are important in the establishment of the venture. All the projection, like the initial capital that will be invested, the initial profit margin, the number of employees to employ and the production structure have been considered.

Introduction

A business idea is a concept used for financial gain. Usually this idea can be out of one’s passion or determination to bridge some market gaps that they identify in the process of living in a certain area for this case Brisbane, Melbourne, Australia. A bakery can be established as a retail in a location that can sell goods to customers or can be established as a wholesale business that sells baked goods to institutions and retailers.  To start a bakery, one has to have passion for baking. After entrepreneurs realized that demand for a specific quality of bakery products are consumed by consumers, many have started investing heavily into the industry. Establishing a bakery requires a comprehensive background check on the market since bakery goods are highly perishable. Right strategies need to be sought for and the right cause of action to be laid down. Again, in the food industry, meeting customer demands goes along way into growth of a business. Factors to consider before establishing a new bakery business in Brisbane, Australia are discussed in this paper.

Business Model Canvas

Customer segments

Dividing of customers according to common characteristics is the best idea in a business as it markets the business appropriately and effectively.  The segmentation can be done according to needs, behaviors or traits that the customers share. Matching a customer’s segmentation to my bakery business value proposition, can help me achieve a more lucrative revenue stream. In business model canvas, customer segmentation is important, as it is the building block in bakery business or any other business. The segmented messaging is key to making sure you understand your customers.

Value proposition

Customers buying my bakery services have a clear statement of the benefits they get. There is no value proposition, which is complete without a story.  A value proposition is that statement that will make people take notice of your business, products and services. Bakery business will create a clear picture on what my business has to offer and this will determine whether I am solving my customer’s problems and tell what the customers have to buy from me-the value or relevancy. My value proposition will be focusing on both the design and flavor of the cake at the same time.

Customer relationships

The type of relationship, which a business establishes with its customer segments. It is driven by customer acquisition, retention and boosting sales. As an entrepreneur, I will try get customers and acquire new ones, keep them, and grow the customer’s relationship by growing their value to my business. This ensures survival and success of the business.

Channels

Channels are critical elements in a business market. They are how a business communicates and reaches its customer segments through direct or indirect communication.  Channels act like intermediaries on which the business goods reach the end buyer and in channel distribution, it can be wholesaler’s distributors and even retailers. A good channel distributes businesses value proposition in fast, efficient and cost-effective.

Key activities

They describe what a business must do to make its model work. Key activities in my bakery business will help me create and offer value proposition, reach markets, maintain customer relationships, and earn revenues. The key activities I will be using are marketing, sales, design, operations and distribution for the complete product. For processing,

Key resources

In business model key resources are most useful assets needed to make a business model work and each business need them to create value propositions and generate revenues. They include; physical resources like raw materials, which are the necessary requirements in the baking business and buildings where my wholesale or retail business will be stationed, human resources like staff and intellectual resources such as partnerships and customer databases. They are considered assets to businesses as they sustain and support it. Bakery needs best bakers and best baking machinery. Best baking equipment will ensure the work is carried out promptly and efficiently. Best bakers on the other hand will ensure that the products so designed and baked are of the best quality as preferred by the market.

Key partners

To optimize operations and reduce risks in business models, cultivation of buyer-supplier relationships to focus on core activity is necessary. Key partners are a network suppliers and partners that make the business model work. In retail bakery, key partners will be majorly my customers.

Revenue structure

Revenue structure plans strategy and communicates the revenue streams of a business and acts as a key component of a business model. In developing my bakery revenue structure, I will determine the types and sources of revenue my business will be generating.

Cost structure

My bakery business I will describes monetary consequences while operating under different business models. I will make use of cost-driven type of cost-structure. The business will focus on minimizing all costs i.e. low-cost structure and can opt to use value-driven structure like valuing less on costs but will focused on creating value for baking products and services.

Market

Market Size

Brisbane is one of the largest towns in Melbourne Australia. As at 2017, Brisbane had a population of 2.39 million people (Australia population, 2017). Its population and the population of neighboring towns form the market base for the bakery products that will be produced by my business. Population continues to grow

Growth rate

Brisbane is located in the city of Queensland.  The city is a prevalent traveler destination and it serves as an entry point to Queensland. Its amazing nightlife where there are many lounges and nightclubs. Its hospitality industry keep growing thus attracting many guests. Between the 2015 and 2016, its population increased by 90,000 persons (Australia Population, 2017). Since the year 2012 to 2016, the population has grown by 0.391 million people. Dividing the population by 5 then there has been an average increase of 0.0782 million people per year. Thus, while establishing the business, careful consideration should be on the population growth rate.

Factors affecting firms in this Industry

Some of the factors influencing the industry negative is the large capital required for establishing a bakery. These huge amounts scare off small-scale traders. Another threat is there will be stiff competition from the established brands. This trend also works in favor of the existing well-known brands (Woodruff, 2019). Another worrying trend to the industry is people are increasingly becoming health conscious, making them to demand for low-carbohydrate, gluten-free, whole grain, organic, and paleo products. This move has seen buyers using alternatives to bread such as nuts, fruits-bars and yogurt.

Market Segmentation and target customers

The bakery market is made of bread, cakes, rolls, soft cakes, retail baker products, and pies. In Brisbane, bread takes the largest percentage of the consumed baker products with close to half of the people preferring bread while cakes and soft cakes follow with a percentage of about 35% and the rest of the segments. The residents of Brisbane and the neighboring towns are the target market for this business.

Where are the customers getting the product now?

Most of the breads and other bakery products sold in Brisbane are baked within the city and some from neighboring cities. Although there bakeries in Brisbane, their products are in short supply within the city.

Operations and Technology

Options for developing technology

Operations and technology will be determined by the market perception and response during the feasibility study. To begin with, customer service technology will be in place. Customer service technology gives attention to business processes, technology, strategy, and people management (Legget, 2013). These parts explains what, when, how, and when of the technology.

Emerging technologies

Some of the emerging technologies in the bakery industry are driven by the shifting demands from the market. People are getting more concerned with the types of food they consume thus making them avoid some of their favorite foodstuffs. Therefore, the bread and baking industry has had to develop ways of factoring in the consumer demands. Other reasons why innovations in the baking industry is for convenience and pleasure to the consumers (Suas, 2006; Cauvain & Young, 2006). Replacing the traditional flour to obtain gluten-free muffin. Gluten and allergen free baking in this industry ought to select from a range of ingredients to achieve the same product as with conventional methods (Martinez-Monzo, et. Al., 2013:56). Replacing sugar in ice cream with fruit as a substitute. Sugars tend to bring more complications as people age, in order to avoid these complications, people have preferred sugarless products or those baked using natural sugars like those in plants like stevia.

Options for producing the product

In the baking industry, quality is key to a successful venture.  In the initial stages, the business will be subcontracted to other bakeries in order to establish the brand. As the brand takes root, other options like bringing on board other people as partners to expand its growth will be possible. Starting small through subcontracting minimizes the risk of losing all the capital invested if the business will fail to stabilize. Starting small helps in understanding the dynamics of an industry as a player now. This provides an avenue for realigning their strategies on the business to fit into the industry. Finally, inviting partners to help grow the business, will spread the risk such that in case it fails to take off, the loss will be shared equally among the partners. Again, partnering helps avail capital needed for establishing a brand that will compete effectively with existing brands. Whenever a business has a series of partners, then through their connections, the business will get more customers for their products.

Sale and Distribution

In bakery sector, the market structure is partitioned such that producers are concerned with production while sellers are concerned with retailing and distribution to the consumer (Bwana, 2018). The sales and distribution channel to be considered ought to factor in that bakery product are highly perishable. The main aim of the distribution network is to ensure efficiency in channeling the product from the producer to the consumer; the consumer needs to get the product before it rots. With this in mind, the best method of selling and distributing these products is through giving incentives to the locals by giving them motorbikes for distribution. This move will facilitate the movement of goods. In addition, those who have their own motorbikes can give a surety so that they get the products paying later after they have been paid. The business will also be involved with distribution to facilitate product delivery and sourcing for new markets.

Resources required

To begin bakery operations capital is the first resource to be considered. In my case, there is enough capital to outsource for baking services from the already existing brands. Skills for establishing my own bakery are available since there are many jobless graduands who have the required skills. The government creates shortages for brokers to import agricultural products even when farmers have not sold their produce to the government. Once suppliers are given good incentives like the ones proposed above, they will always consider my business. Components of production like machinery will be bought overtime.

Human Resources

Ownership and ownership structure

The company in its initial stages will be owned and run by the owner. The owner will be in charge of hiring, purchasing and creating necessary channels of buying and supplying. After stabilizing, the owner will look to bring in more investors who will become partners. Every partner at this point will be playing various roles. The initial owner will be in charge of the finances, the other partners will focus on marketing, getting proper labor, machinery and running other business operations.

Man-power requirements

At the beginning, the business will require 10 employees who will increase to 15 employees in the second year and then 18 in the third year. In the third year, new machinery will be in place, products will be in high demand thereby increasing the number of workers by a small proportion as compared to from the first year to the second year. In order to get the right employees, I will advertise vacant positions after finding out the right remuneration for category of workers I will be sourcing. At the beginning, employees will be paid according to the produced units. As the business becomes established, knowledge and time an individual has spent in the business will be a contributing factor in deciding their wages. All the employees will have a privilege of getting two breads each day as a reward for turning up. There will be frequent training to all employees according to the duties they are carrying out. Training on effective production measures and the new technologies will be offered on an ongoing basis as it forms a basis of any business.

Technical and management experience

Starting a business requires knowledge on running a successful business venture. Understanding the risks involved, growth path and other strategies that are necessary for sustaining the business. Strategic planning is core. Marketing, managing expenses, employees, and logistics are the management necessities (Markovich, 2019).

Growth Strategy

Location of the business is key in the growth of the business. Location of a business can either escalate rivalry with competing brands or open up a new market for the industry (Geoblink, 2018). Growth is determined by the performance of a business in terms of revenue generated and the capacity to grow. As the business grows, more offices will be opened to facilitate in service delivery.

Finances

The bakery will be established to be producing bread and then other products later on. The price of a loaf of bread in Kenya is AU$1.85 (Expatistan, 2019). Initially, the 10 employees are expected to produce 10000 pieces of loaves. The total revenue to be generated in a day is expected to be AU$18,500 every day.  In Australia minimum wage, the minimum wages employees receive in a day range from $18.93 per hour (Australian Government, 2019). Taking 8 hours wages to be the wages paid to our employees that will make a total of $1514.4 in terms of wages per day. Before taxation, the daily gross revenues projected to be $1020.  Small businesses pay a tax rate between 30% of its profits (Trading Economics, 2019). Therefore, from $16,900, let us say the profit will be $10,000, and then the total tax charged at a rate of 30% will be $3000. The net profits will be $6000 per day.

References

Trading Economics (2019) Australia Corporate Tax Rate. Available at: https://tradingeconomics.com/australia/corporate-tax-rate 

Australian Government, (2019) Minimum wages. Fair Work Ombudsman. Available at: https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/minimum-workplace-entitlements/minimum-wages 

Australia Population, (2017). Population of Brisbane 2017. Available at: http://australiapopulation2017.com/population-brisbane-2017.html 

Bwana, J., (2018). Manufacturing success requires right distribution. Business Daily. Available at: https://www.businessdailyafrica.com/corporate/shipping/Manufacturing-success-requires-right-distribution/4003122-4350298-744pof/index.html 

Cauvain, S.P., & Young, L.S., (2006), Baked Products: Science, Technology and Practice, Blackwell House, Oxford.

Geoblink, (2018) The perfect recipe for a bakery business expansion strategy. Available at: https://www.geoblink.com/blog/expansion-bakery-strategy/ 

Legget, K., (2013). What Is Customer Service Technology? Forrester. Available at. https://go.forrester.com/blogs/13-06-27-what_is_customer_service_technology/ 

Markovich, M., (2019). Keys to Running a Successful Bakery. Chron. Available at: https://smallbusiness.chron.com/keys-running-successful-bakery-24938.html 

Martínez-Monzó, Javier & García-Segovia, P & Albors, Jose. (2013). Trends and Innovations in Bread, Bakery, and Pastry. Journal of Culinary Science & Technology. 11. 56-65. 10.1080/15428052.2012.728980. 

Expatistan, (2019) Cost of Living in Brisbane, Australia. Available at: https://www.expatistan.com/cost-of-living/brisbane 

Suas, M., (2006). Advanced Bread and Pastry: A Professional Approach, Delmar Cengage, N.Y.

Woudruff, J., (2019) Bakery Industry Analysis. Chron. Available at: https://smallbusiness.chron.com/bakery-industry-analysis-64831.html 

Appendix

START-UP COSTS

Equipment/ Capital costs

Registrations

Costs ($)

 

Costs ($)

   Business name

50

Start-up capital

10000

   Licenses

250

Office equipment

 

   Permits

100

  Furniture

3500

   Domain names

50

Shop fit out

1500

   Trade marks/ Designs/patents

50

   

Rental lease costs

1000

   

Utility connections& bonds (Electricity, gas, water)

200

   

Training

100

   

Wages (for the first 2 months)

2000

   

Stock/raw materials

1500

   

Insurance (per month)

 

   

   Public liability

50

   

   Professional indemnity

50

   

   Product liability

100

   

  Workers compensation

200

   

   Business assets

850

   

   Business revenue

400

   

Printing

50

   

Stationery & office supplies

300

   

Marketing and advertising

400

   

Total start-up costs

$7700

Total Equipment costs

$15000

Assumptions:

     

All figure are GST exclusive

     

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