EVALUATION OF BUSINESS PLANNING

EVALUATION OF BUSINESS PLANNING, DECISION MAKING, AND CONTROL

Introduction

When starting a business, it is essential to have detailed evaluation goods and services, the strategies of offering services to consumers, human resources, clientele, the supply chains and the financial requirement in terms of capital and costs. To make sound decisions and to understand the detailed previous and current status of the business is necessary. The main objective of this evaluation is to give a picture of the future of the industry. In doing an evaluation report before starting a business, it is essential to provide sincere and precise forces and requirements that could enhance decision making when starting a business. This report aims to evaluate how planning, control of the company, and making decisions in the Garnet Hotel in the United Kingdom.

Part one

Word count part one =1107

The Garnet Hotels considers two options in venturing into a new business where it considers opening a new Budget hotel at the city center or expanding an already established Boutique hotel, which is 30 minutes drive from the city center. For them to choose the best investment, they should evaluate an integrated analysis of both business options (Bank, p147). The business should do a comprehensive review of the clientele and market segment, for example, they should consider between establishing a new hotel that targets low and middle-class customer and travelers with investing in the established Boutique hotel that attracts high-end client for short and long stay (Jody Zall Kusek,p112). The management should understand the competitive nature of the markets in both Budget and Boutique hotels to come up with an effective marketing strategy.

To start a successful venture, the above considerations are essential and should be adequately harmonized. Before venturing in either option, the competitive advantages and opportunities in the hospitality industry should be clear. In planning to venture into either of the business, the plans should be outlined in paper through a business plan that could give a blueprint on how to start, operate and improve the venture (Martinez, p35). Planning using business plans brings out the abilities of either option, outlines the effort for success, and could give alert in case of deviations from the business objectives. Efficiency planning would help Garnet Hotels the opportunity to plan to the future so that they could proactive to business threats. We recommend option one to establish new ventures because it identifies the new market segment for the current product. It focuses on those customers that were not in the target market previously (Martinez, p96). The new users will expand demand. It will lead the business to gain new customers, increased revenue, and hotel growth.

In choosing the appropriate option to invest, the Garnet hotel management needs to have a mutual understanding before making a decision. Top management may have different options on which option to venture, so it is essential to put into consideration the opinions of the management and from there use a professional and factual business survey to choose the best option. Some managers may decide to expand an established boutique hotel as opposed to the new budget hotel depending on their tastes and perceptions (Wasserman,p67). In evaluating, planning, and making decisions, it is vital to engage as many managers as it could be to give their input in policy formulation since it could enhance good management strategies working toward the same business goals.

In evaluating and making a decision on which options to use the financial needs and Costs should be determined and make a choice based on costs and returns projection (Martinez, p56). Since both options renovations are required and could take some time that is three months and 18 months, respectively, it is important to consider their implication on the start and operation of the hotels. The planning should precisely and factually tabulate the variable and fixed costs. It should request the funds that could help in starting and run the business in all aspects. In planning and evaluating the options, it should consider the input and needs of all stakeholders in the industry (Wasserman,p167). The board of directors and stakeholders should give consent to decisions made to enhance effective running and operating so that they could choose an option that could give maximum returns. The variable and fixed costs for both option 1 & 2 are

Fixed Cost

Wages of the labor
Telephone and internet bill
Security services if there is an agreement on a fixed amount
Advertising cost
Regular lease rent
Taxes to the government
Hotel employees health premium
Land purchasing cost ( option 2)

Variable Cost

Food, beverages
housekeeping and cleaning expenditures
Flower decoration arrangements.
Visitorroom facilities.
Dinner HVAC costs.
Stationeries used in Front deskand restaurants.
Chemicals for laundryand water treatment plants

The plan should give a clear outline of the best option that could attract more new employees and management staff. The management should make a decision relating the workforce through understanding the number of employees in either option and choose an option that could give the best return on investment (Wasserman,p56). It is easier to expand on Boutique hotel since it has an already established business niche and has employees who have had a clear understanding of the business objectives and organizational values and cultures of the Garnet Hotels (Linda G. Morra-Imas, p231). Efficient planning allows the driving objectives of employees, and it could give a blueprint of how to hire and train its staff. This could give the best option of the two on which option would need low costs in terms of recruiting and hiring employees.

The planning and decision making should consider the customers’ preferences and tastes and what other players in the industry are offering. In this era of modern technology, the hotels should embrace technology it its operation and marketing strategies. For example, the installation of high-speed internet, investing in online booking, digital check-in, and key drop could attract more clients in the market since it could be more convenient (Bank, p34). Designing strategies and good market analysis could enable management to make decisions on the services to offer that could put

In summary, the options could be as follows

Option1: To meet the growing demand for centrally located hotels focusing on new customer short breaks and low budget business travelers.

Advantages

As the business is a new venture that will provide creative freedom to express ideas, creativity in the form as desired or envisioned. Starting a new venture set the direction according to own desires and goals
This business will have a wider target market by taking into account low budget customers, and that will ultimately increase sales revenue.
Already have a building structure that can be easily refitted
Less time required to start the business because already infrastructure is available

Disadvantages

This new venture will be started on a lease agreement that has several disadvantages; assets may be taken back from the lessee when the company is wound up, thereby disrupting his operation. The lessee cannot make any improvement or alternation without permission. The rent has to be paid regularly, whether the business is going in profit or loss.

Option 2: To increase and improve the existing facilities available for the customer/Expansion in the product line

Advantages

Being customer-focused helps to build customer loyalty and brand recognition. By improving the existing facilities, customer perceived themselves being more valued. Expanding the existing facilities or products line is an important strategy to increase the revenue or market share. It has an advantage of greater market opportunities in different market sectors by customizing the existing product or service that matches the customer needs.

Disadvantages

Just expansion in the existing services hinders the creativity, as it reveals that they are unwilling to take new innovative ideas. As overtime, customer requirements may change so that new innovative ideas may be taken into consideration.

As the business is customer-focused, it helps to build customer loyalty. This means that clients being valued are willing and pleased to continuously use the services because they are Valued as their need and requirements are being met.
As a result of building loyalty, referrals will increase because existing clients are more likely to

Spread the word and refer the services of the business to other business associates. This will

Benefit the company as customer base will increase and they can reduce the some expenses

Such as advertising

Decision making and control

The implemented strategies and plans must be closely monitored, evaluated, and adapted to changing opportunities. Performance should be correlated with standards; in case of deviation, corrective action will be taken.

Part two

Word count part 2=843

Managers should understand that their decisions affect the profitability of the company. These decisions they make regarding volume, pricing strategy, and costs affecting the business achieving long term goals of profitably (Billie Cunningham,p17). Garnet hotel management should know profits, revenues, expenses, and volume. The cost-volume– analysis would help Garnet hotel to evaluate dynamics in profitability due to changes in size, incurring costs, and pricing strategy (Martinez, p98). Managers from the accounting department could provide data that could give insight to analysis that could highlight the relationship. Managers could be in a position to project future profits to help them in planning and monitoring the organization operates in the future.

The cost implementation of cost-volume-profit helps an organization to have a clear understanding to know the desired level activities in the company that could enable them to make profits. It would show the action that could avoid losses in a company so that they could plan and to prevent deviations from the business blueprint (Drury, 67). Having an elaborate analysis could help an organization have a good chance to monitor the performances at the organization level. Managers could also have insightful decision making since they are in a position to analyze organization risks and threats they are shared across the hospitality industry hence choose a reasonable cost structure that could help them attain profits.

Cost-volume-profit analysis is a tool that could help the organization to have an understanding of how the decisions made regarding day to day operations of the business and marketing activities and decisions affect the profit margins of the company (Martinez, p127). The profits margin shifts depend on the performance of the unit price of the item I relation to the amount of variable and fixed costs. For example, the annual profits at Garnet Hotel would depend on the rate of booking self-contained hotels and the expenses that are incurred in offering services like paying staff, paying for the internet, and the meal offered (Billie Cunningham, p56). Balancing and understanding the relationship between the three could influence the pricing per unit that could determine whether they would run on a loss of profit.

There are many assumptions during the application of cost-volume-profit analysis, like change in the number of sales is the only cause that can influence the cost and revenues generated in an organization. A company could have many internal and external factors that influence the profits and expenses (Martinez, p124). This could be as a result of an organization reputation among its consumers that could lead to increased sales and profit margins. They analysis is based on the assumption that the cost in an organization arises from variable and fived costs only. There are other many aspects that influence the dynamics of the amount of costs incurred in the process of running the business (Drury,p56). In order to have a precise and factual analysis of cost- volume- profit analysis the organization should seek professional interpretation that could help them in pricing that could enhance profit.

Cost annually

New Budget Hotel Costs	£	£
Variable costs per overnight stay in a room	12.50	12.65*365=4471
Monthly maintenance & cleaning costs shared areas	6,500	6500*12=78,000
Other Annual Overheads	3,134,000	3,134,000
Monthly Group Overhead costs	150,000	150,000*12=1800,000

Required target profit 760,000£

Monthly data

Sale = (175*30) = 5250£

Variable cost = (12.50*30)=357£

Maintaining costs = (6500/12)= 541£

Contribution per month = 4334 £

So contribution per sale ratio (CPS)= 4334/5250 = 0.82

Fixed cost = 3134+150 = 3284£

Target sale = (Fixed cost + target profit)/CPS

Target sale = (3284+760000)/0.82

Target sale = 930834 £

From the above calculation, it’s quite clear that in order to earn profit of 760000 £, hotel must made the sale of 930834 £.

No. Of rooms = 80

Occupying annually = 80%

So 80*80=64

Variable cost (vc) = 64*12.50 = 800£

Variable cost annually ( vca ) = 800*365=292000£

Monthly maintenance + cleaning cost shared = 6500*12 =78000£

After annual overhead = 3134000£

Monthly group overhead cost = 150000*12=1800000£

Total fixed cost (fc) =78000+3134000+1800000 = 5012000£

Now by keeping above information in mind£

Sale = 6064000£

NC= 292000£

CM= 5772000£

Fc = 5012000£

Profit = 760000£

Price = sale/ (no. Of room occupy)*365

Price =6064000/64*365

Price = 259.58£

So from the above calculation it’s clear that to earn expected profit 760000£, per room price will be 259.58£.

Conclusions

In conclusion, when it comes to starting a business, it is essential to do an evaluation that could give guided information on decisions to be made. In choosing a business, factual and precise information on the financial needs and costs are necessary to provide a blueprint on the direction it should follow. The pros and cons should be analyzed so that the best option is considered in decision making. An organization could quickly enter into a business environment; it is operating as compared to venturing to new markets.

References

Bank, W. (2020). Doing business 2020. Berlin: World Bank Publications.

Jody Zall Kusek, R. C. (2016). Ten steps towards result-based monitoring and evaluation. Oxford: World Bank Publications.

Linda G. Morra-Imas, L. G. (2015). The Road to Results. Washington: World Bank Publications.

Martinez, S. (2015). Impact Evaluation in Practice. London: World Bank Publications.

The program, U. N. (2015). Handbook on Planning, Monitoring, and Evaluating for Development Results. London: United Nations Development Programme.

Wasserman, N. (2015). Founders dilemm

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