BUSINESS PLAN – Organic Eats

Business overview

Individuals with poor eating habits are found to deprive themselves of necessary nutrients which can result in obesity, fluctuating blood pressure, heart diseases, stroke, cancer, osteoporosis, tooth decay and diabetes (Lowden et al., 2010). Unhealthy eating is consuming excessively high amounts of fatty and greasy foods, high flavoured food items, milky products, and sweet foods (Dutra et al., 2016). An increasing number of diseases associated with eating processed food has driven the attention of the general public towards organic foods. Moreover, research has claimed that organic foods generally have more nutritional benefits (Popa et al., 2019). Nowadays, people who suffer from allergies from preservatives and chemicals in processed foods also go for healthy and organic food options (Asif et al., 2018). Therefore, this business is inspired by the growing demand for organic foods. The business idea selected for this project is of a restaurant that specializes in providing organic foods to its customers. The name chosen for the restaurant is ‘Organic Eats’. This restaurant will be located in a famous location which is a university or a college. Due to limited finances, multiple branches of this newly established venture cannot be developed simultaneously. Hence, only one university has been chosen, which is ‘Al Buraimi University’ of Oman. The first outlet for organic eats will be opened in Al-Buraimi University of Oman. Vegetables, tubers, seasonal fruits, seeds, animal proteins, nuts, grains and whole grains will be majorly used for coming up with delicious and healthy food items at the ‘Organic Eats’.

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Mission

The mission of Organic Eats is to educate the customers regarding the health benefits of organic food items and offer healthy and nutritious food alternatives to the consumers.

Vision

Organic Eats’ vision is to execute a successful and unique business model that supports organic, sustainable, and natural food manufacturing practices by never compromising on exceptional quality, integrity, and respect towards mother nature.

Business goals

  • To educate the consumers regarding the growing importance of organic foods over processed and inorganic foods and to improve the wellbeing of society and increase the profits by 15% by March 2020.
  • To provide food items to customers within 3 minutes of them placing the order.
  • To provide employment opportunities to fresh graduates and people coming from low-income families by hiring at least three new employees by the end of December 2020.
  • To generate zero waste and use food in the most efficient way possible.
  • To be continuously committed to customer service by providing exceptional quality service.

Market Segmentation

Market segmentation is useful in identifying the needs and wants of customers in a targeted segment based on their age, income, behaviour, and personality traits. Market segmentation will help ‘Organic Eats’ to divide all the customers into approachable segments and then cater to their specific needs (Ahani, Nilashi, Ibrahim, Sanzogni and Weaven, 2019). Out of demographic, behavioural, psychographic, and geographic segmentation, the first two types of market segmentations are conducted below.

Demographic Segmentation

Age

Since the restaurant is to be situated within Al-Buraimi University, customers between the age of 17-25 years will be mainly targeted.

Gender

Both male and female consumers will be targeted equally by the Organic Eats

Income

Low and middle-income individuals will be targeted. The prices of food items will not be high as the college and university going students have a limited amount of money.

Behavioral segmentation

Behavioral segmentation is the type of market segmentation that formulates groups of people on the basis of particular behavioral patterns in common (Sgaier, Engl & Kretschmer, 2018). Using this segmentation approach, the following three segments have been created:

The conservatives

This customer segment constitutes of individuals who are most concerned about the health aspects of food and were interested towards natural products

The trendsetters

Customers placed in this market segment had a liking towards local food products and organic food items. Moreover, they were inclined to buying healthy food likely to be cooked

The unengaged

This group of customers is not concerned and aware enough regarding the food-related issues. In addition, these customers also reported the minimum consumption of organic food products. ‘Organic Eats’ will focus on the first two customer segments for generating most part of the sales and will try to aware the last segment about the numerous health benefits of organic food consumption.

Market and Industry Analysis

The food industry in Oman is one of the most crucial industries and is ever flourishing. Oman specializes in the production of vegetables, dates, fruits, and other such food crops (Hoetjes, 2020). The agricultural land used by Oman is 1.4 million hectares which are estimated to be 1.46% of the total land area of Oman (Qureshi, 2020). 25,125 hectares of land is utilized for planting dates while 61986 hectares of Oman’s land is used for growing crops such as vegetables, fruits, cereals, and oilseeds. Oman has enhanced the wheat, barley, and sorghum production in the previous years, while on the contrary, the country does not produce millet and maize at all (Market Research, 2020).

The demand for organic foods has been observed to increase frequently in Oman. The Compound Annual Growth Rate (CAGR) of the organic and gluten-free food items is expected to increase by 9% between years 2021-2025 (Khoja, Rawaf, Qidwani, Rawaf, Nanji and Hamad, 2017) Experts suggest that the ever-increasing organic and gluten-free foods demand is due to a rise in disposable income of customers, obesity issues, celiac diseases, increasing urbanization, growing awareness towards healthy eating and gluten intolerance (Lee, Ng, Zivin and Green, 2007). In addition, an increase in organic food consumption is also due to the growing expatriate population resulting in the positive influence of Western culture on the organic food market of Oman. Major players in the Oman food industry that provide gluten-free and organic food products include Nestle, Nairin’s, Dr Schar, Bob’s Red Mill, Barilla, Glebe Farm, Kupiec, Alara and many others (Market Research, 2020).

Understanding the growing significance of food security in the food industry, the governments of the GCC countries, including Oman, have undertaken numerous food security initiatives to protect the food industry. In addition, the market analysis of the food industry of GCC suggests that Oman amongst the GCC countries has the highest rate of food self-sufficiency. In Oman, support for state-backed and innovative meat, dairy, poultry, and red meat projects has increased at a robust amount. However, the new food segments, such as organic foods in Oman, still require more strong regulations (Oxford Business Group, 2020).

Porter’s Five Forces Analysis

Porter’s five forces framework is used to assess the competitive environment of Organic Eats. Using this model, Organic Eats’ rivals, customers, suppliers, potential new entrants in the organic restaurant business and substitute products that may affect the business of Organic Eats will be discussed (Wellner and Lakotta, 2020).

Industry and competitors

The market analysis suggests that the food industry of Oman has been ever-growing with an increased awareness towards organic eating (Al-Farsi, Alasalvar, Morris, Baron and Shahidi, 2005). The main competitors of Organic Eats include bakeries and shops that offer organic food items. One such example is Gourmet Taste Sweets LLC in Oman that specializes in the provision of organic foods to its customers in Oman.

Bargaining power of suppliers

The ‘Organic Eats’ will acquire raw materials such as milk cream, cheese, vegetables, corn, fruit etc. directly from the private households who sell these at reasonable rates in Oman. Furthermore, a large number of private households are present to choose from and hence, their bargaining power is low.

Bargaining power of customers

The number of organic food businesses is expanding rapidly with an increase in awareness regarding healthy eating in Oman. Therefore, customers have a plethora of options to choose from, as they frequently try new organic food places. Hence, the bargaining power of buyers is high.

Potential new entrants

There are existing food businesses such as bakeries and certain restaurants that may modify their current business models with an increasing demand for organic food products in Oman. Such businesses are considered to be the potential new entrants in the organic food market. Furthermore, organic businesses that develop from the scratch are also said to be potential new entrants.

Threat of substitute products

According to the research developed by Matoshi (2017), of all the products, food items have the highest number of substitute products. With an increased demand for local organic food products, competitors usually devise strategies to offer similar products at lower prices. Similarly, customers might buy directly from private households and farms that offer similar organic food products as Organic Eats.

Customer and Value Proposition

The unique selling factor which can also be considered as a key success factor for Organic Eats is its business orientation towards selling organic and healthy food items. This one characteristic sets it apart from other food businesses and can be considered a competitive advantage of the company. Apart from providing food options that are healthy and organic, the startup of organic eats also has another competitive advantage which is its exceptional customer service. With healthy food options and outstanding customer service, Organic Eats offers reasonable prices for its food products. The target market of Organic Eats includes students and professionals who are health conscious and price sensitive in Oman.

Marketing Strategy

In order to come up with an effective marketing strategy for the Organic Eats, the 4 Ps of marketing will be devised as follows:

Product

The food products that will be offered to the potential customers by Organic Eats will be organic and healthy. The product lines included in the menu will be served as breakfast and lunch at the Organic Eats. These breakfast and lunch options include healthy food and beverages such as salads, fresh fruits and fresh vegetables, scrambled eggs, egg patties, pancakes, healthy smoothies’ options, fresh juices, dark chocolates, yoghurts, muffins, bars, and other healthy options such as food items made from oatmeal.

Price

After a thorough analysis of the customer responses regarding setting an initial price, assessing the value of the products, using breakeven analysis and different pricing strategies, competitive prices will be set for the products of Organic Eats. For this purpose, the price change response of the customers will also be predicted to avoid negative feedback with regards to the product price from the customers (Schindler & Schindler, 2011). Even in the initial stages, the pricing of the products will be based upon the value perceived by the customers for the products. This is particularly useful when a certain product has higher demand among the customers. In this way, the forecast of demand for a product can be used as a reference to set a value-based price for a product. Mostly the range of prices for the majority of products is around 1 to 5 OMR because the products of Organic Eats are healthy, fresh, and organic.

Place

The business is aimed to start from a university or college to mainly target the students as the potential customers of the business. However, Organic Eats will also offer delivery services to its customers within the city to expand the customer base in the long run. Eventually, this will help the business to build a reputation that it can capitalize upon by building new cafes at additional locations. The main options that are considered for this are Al Zahra College for Women, Arab Open University, Majan University college and other schools and educational institutions in Muscat.

Promotion

For above-the-line and below-the-line marketing of its food products, Organic Eats will primarily market itself on different social media platforms. These platforms mainly include Instagram, Facebook, Twitter, and LinkedIn. These will not only help the business grow in terms of the customer base, but it will also help in recruiting talented employees via LinkedIn. Through Instagram, the outreach will be expanded by reaching out to bloggers for effective marketing of the products, customer service and the ambience of the cafes via hashtags and Twitter and Instagram trends. The digital marketing will also be used to communicate discount offers, promotions and new product lines to the customers.

Product Launch Strategy

In order to gain a competitive advantage in a market, it is essential to allocate adequate resources and thoughtfulness in the brand launch and eventually, the products’ launch (Chiu, Chen, Shyu, and Tzeng, 2006). This is because the pressure of providing the quality products and services to the customers is intense and therefore, the contributing factors (e.g., technological developments, mass communication, digitalization, changing customer preferences and trends, customer demographics etc.) are to be considered before coming up with a launch strategy (Chiu, Chen, Shyu, and Tzeng, 2006). The initial focus of the Organic Eats will be on the residents of Muscat, but it will expand to nearby cities once the breakeven stage is passed and the venture starts generating profits. For this reason, social media will be considered a primary tool to market the products and service offerings of the Organic Eats. Food bloggers and lifestyle bloggers with an expanded reach and a large number of followers will be approached to market the business. Discount offers for the customers on the launch day will be offered to the customers so that the customers are encouraged to give the company the first try and then spread the positive word of mouth.

Marketing Objectives

The marketing objectives that are set for Organic Eats are as follows.

  1. Expanding the loyal customer base by 10% in 10 years’ time period of the business.
  2. Ascertain positive growth figures for the Organic Eats monthly soon after the breakeven point is reached.
  3. Enhance the customers’ engagement on digital platforms and in the physical retail store at the given university in Oman.
  4. Build healthy, competitive relations with stakeholders, marketing agencies and social media bloggers to communicate a positive image of Organic Eats in the minds of the customers.

Management Plan

There is a need for a well-developed management plan for Organic Eats which will help the business flourish by achieving its business objectives. The management plan is crucial because it clearly defines the roles and the details of the projects that are to be carried out (Burns, Berenschot, Calabrese, Kasper III and Lovell, Restaurant Technology Inc, 2013). The business will start from a relatively small scale of a container and a fewer number of employees in two locations. One will be an educational institution in Muscat, and the other will be a professional business organisation. The employees per location will be two chefs, three waiters, a supervisor, and a manager. The manager and the supervisor will be macro and micromanaging the financing, management, and the day-to-day operations of the business. The supervisors will be employed after a thorough selection process so that the employment opportunity is given to a genuinely deserving person.

Operational plan

An operational plan will guide the employees to carry out their daily jobs and the operations of the business at the Organic Eats. This will also help the mangers and the supervisors in preventing the stockouts in future and in this way, the lead times can also be reduced. For this purpose, an effective flow of raw materials such as eggs, milk, fruits, and vegetables before the day starts will be ensured. The chefs will prepare the food, and the customers will get their food through self-service at the cafes. The manager will oversee the whole process at a macro level to ensure the smooth flow of business operations.

The financial resources required for this venture include the capital for renting the place, and the acquisition of starting inventory as well as the assets required for this purpose.

Additionally, a specific number of labour is also needed for this venture.

Critical risks

Risk is commonly known as a situation where a business cannot achieve its operational objectives, and the profit margins get lower in a response to this failure. The risks that a business can face during its life cycle are influenced by the external as well as internal factors such as competition, reputation fragility, economic conditions in which a business operates, and the finances needed for the operations etc. (Jallow, Majeed, Vergidis, Tiwari, and Roy, 2007).

Competitive risks

According to Ding and Chung (2014), competitive risks are apparent in the restaurants and hospitality industry. The competitive risks involve the competitors thriving for the same number of resources and targeting the same customer segment thereby, making it difficult for the new incumbents to gain a competitive advantage over the already established key players. The restaurant industry in Oman is flourishing because of the relaxation in the policies by the government, which has also resulted in increased competition in the industry.

Economic risks

Economic risks are mostly related to the macroeconomic factors in the external environment of the business. The macroeconomic factors can severely affect the business operations of the Organic Eats. For example, the government tax regulations on GST can affect the demand patterns and the customer influx in the cafes and restaurants. The tax regulations and the fluctuations in the GST can be countered by a low pricing strategy once the business takes off after the breakeven so that the economies of scales are achieved in case of mass production.

Financing

Organic Eats will require OMR 70,000 to start the operations. Funds will made available by the owners of the restaurant. OMR 20,000 will be used to buy the furniture and other equipment for the restaurant whereas OMR 4,000 will be spent to acquire the operating licenses. The remaining amount will be kept to cover the daily expenses, marketing expenditure and the wages of the staff.

Balance Sheet

assets omr omr
non-current assets:
tangible assets 6,000
intangible assets 3,900
current assets:
advances 24,000
account receivables 12,000
stocks 24,000
cash and bank balance 10,100
80,000
equity and liablities:
equity 40,000
NON-CURRENT liablities: 20,000
current liabilities:
trade payables 11,000
short term loans 7,000
other payables 2,000
80,000

Cash Flow Forecast

Month Package sold Tickets issued Commission earned (OMR) Fixed costs

(OMR)

Variable costs

(OMR)

Balance

(OMR)

January 20 40 7000 (10,400) (6,000) (9,400)
February 32 64 8,180 (10,400) (7,000) (9,220)
March 44 76 9190 (10,400) (6,400) (7,610)
April 60 100 1460 (10,400) (8,000) (9,940)
May 40 50 8510 (10,400) (5,000) (6,890)
June 50 72 4,600 (10,400) (6,000) (7,320)
July 76 108 9200 (13,000) (7,100) (7,540)
August 130 200 23650 (13,000) (10,050) 600
September 150 268 30530 (13,000) (11,040) 6,490
October 110 160 26960 (13,000) (9,170) 2,920
November 62 118 17400 (10,400) (3,800) 3,200
December 40 90 9,000 (10,400) (1600) (3,000)

Critical Success Factors

The critical success factors are also the source of key success factors. These are the factors which can help the business in building a strong competitive advantage against the customers. The major areas that Organic Eats needs to focus on are human resource management, marketing, finance, and operations management. The strategies should be devised accordingly, as well. The business also needs to give considerable importance to the feedback given by the employees to improve the quality of the products and services at the Organic Eats.

Competitive edge for the Organic Eats

The competitive edge for the Organic Eats will be its effective labour management and well thought of competitive pricing strategy for good quality products. These factors will enable the organic eats to remain competitive in the business of food industry of Oman.

Conclusion

The report analyses the factors in the internal environment of the business that the Organic Eats should specifically consider before its commercial launch in the market. This is a customer-oriented business which aims to provide the customers with healthy and premium quality food products at a competitive pricing strategy. The feasibility of this business plan is considered by carefully analyzing the risks involved in this business venture. The main location of the business is the educational and professional institutions in Muscat, Oman.

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