Feasibility of Setting up Electronic Equipment Store - Essay Example

EMGT N446 First Draft of Final project of feasibility study to set up electronic equipment store Al Hammadi for Electronic Products and Services Prepared for: Dr. John D. Politis Prepared by: Fawaz Mohammed Yousif H00015946 Due Date: 11/12/2011 Feasibility study to set up an Electronic equipment store Al Hammadi Table of Contents Table of Contents 3 Background about the company 5 Demand Market of the Electronic Equipments 7 Collection Information about the Electronics Equipments, & Prices 9 License from Department of Economics Development 10 Cost of the electronic equipment store 10 Labor: Skills required 11 Management aspects 12 Marketing Aspect 13 Return on investment 13 Would it possible to graph these and create a break-even-analysis? 16 Expanding into GCC markets 16 Al Hammadi for Electronic Products and Services will launch its plan to expand its operations and reach across the region after becoming a stable business. The first investment will be in Jordan. The aim of expanding the business into GCC markets will be to consolidate Al Hammadi for Electronic Products and Services’ market position and channel investment into Jordan’s thriving economy, and to extend the business’ range of service to the more demanding refined investors. Exploring developments within the electronic markets of Egypt, Jordan, as well as Palestine, which will attend to the present reinvigoration and ensuing challenges that these markets encounter, illustrate that non-domestic investment has risen for the past few years (Abu Dhabi Government, 2011). 16 Jordan is one of the most vibrant within the region and makes quantum leaps on every day basis in regard to electronic business. The robust market position within Jordan can be allied to the country’s political stability, rising transparency in addition to strong potential for business expansion. In particular, Al Hammadi for Electronic Products and Services will continue to consolidate its presence within Jordan and at the same time the business will explore new alliance within the GCC and the likelihood of setting up a physical presence within major markets such as Dubai International Financial City. In a nutshell, the business will be fully committed to extend its reach to find new investment openings and alliance, expand the customer base, close in capital to the region’s thriving markets as well as share the expertise within the region (Abu Dhabi Government, 2011). 16 Recovering the business’ Investment 17 Measuring and managing customer satisfaction 17 Identifying the electronic shop’s customers 17 Understanding the needs of the customers 18 Measure the customer performance 18 Focus on priorities 19 Improve the business processes 19 Labor standards in UAE 20 The legal employment tenures in contracts 20 Stipulations on the probation period 20 Wages in accordance with the law 21 Prescribed working hours 21 Records that an employer is supposed to maintain 22 Jurisdiction & the authority of the labor inspectors 23 Schedule 23 Project evaluation 25 References 26 Background about the company Al Hammadi for Electronic Products and Services is a new established shop in Dubai. At the beginning of this business, the main branch will be in Al Barsha. I am going to start this business by opining one main branch and after 6 months, I am going to start expanding within the seven Emirates. I will start opening branches in the big cities such as Abu Dhabi, and Sharjah. Also, I will open branches in the most active malls in these Emirates. I aim to place Al Hammadi for Electronic Products and Services at the same position of Sharaf Electronc Shop. However, this could happen after 1 to 2 years of operating the shop. Al Hammadi will offer a wide range of Electronic Products and Services including the most advance technologies and devices such as mobiles, TVs, radios, Mp3, computers, laptops, cameras, ipads, GPS, electronic equipments for house and office uses and lots of other electronic products. Also, Al Hammadi will offer a service of marinating the devices through Electronic Care Unit. To create such business and do well, lots of steps and procedures should be taken into consideration. This may cost me high capital; however, good organization and planning may return the paid capital into profits and outcomes. In this paper, I am going to comprehensively plan for setting up this business starting from its initial preparations to the needed steps after opening the store. Motto Al Hammadi is the best innovative electronic products and services providers All your needs are at your hand Project Name Al Hammadi for Electronic Products and Services Demand Market of the Electronic Equipments Analysis by Dubai Chamber of Commerce regarding the demand electronic equipments shows that the demand is likely to increase. Sales of consumer electronics are projected to increase from $3.14 billion in 2011 to 43.97 billion by 2015 (Lueken, 2011). This implies that establishing an electronic store is a good idea since the structural development of electronics’ market has remained afloat. The rise has been aggravated by popular electronic equipments like mobiles, TVs, radios, Mp3, computers, laptops, cameras, iPods, GPS, household electronic equipments and office electronic as well as other numerous uses electronic products. Over the last decade, the market for electronic equipments has increased exponentially in Dubai. The increase in demand has been as a result of strong household consumption, expatriate wealth in addition to the enormous number of tourists in Dubai who are likely to purchase the electronics. However, both retailers and wholesalers of electronic equipments in Dubai are facing the challenge of progressing systematically because of the rapid changing nature of the technology industry. Therefore, in this electronic store, I will be required to tackle challenges such as low profit margins resulting from competition, changing configurations of retail outlets as well as competition from local manufacturers and assemblers from foreign imports (Froy, 2009). Consumer Electronics Sales Forecast (2011-2015) Adopted from: Dubai Chamber Based on data from BMI, 2011 Objectives Obtaining the license Recruiting employees Advertising the shop Satisfaction of customer needs Collecting information regarding Electronics equipments and prices The license will be obtained from Department of Economic Development to legalize the business and have the legal permit for the business operation. The recruiting of employees is a very important objective since employees will provide the required labor and hence they will play an important role in business operations as well as the progress of the business. Advertising the shop is important for promoting the shop and the products to the potential customers and also for informing the people in this area about the shop and the products equipped. Additionally, satisfying the needs of the customers is another objective since satisfied customers will always be loyal customers in the shop and there is also a probability of satisfied customers influencing their friends and families to buy electronic products from Al Hammadi for Electronic Products and Services. Finally, information about Electronics equipments and prices is important in establishing the prices of electronics as well as the availability of electronics in this region. Collection Information about the Electronics Equipments, & Prices Collection of information regarding electronics equipments and prices will be done by analyzing the availability and the set prices of various electronic equipments in already establishing electronic stores. Using of Questionnaires is a cheap method of collecting information from a potentially big number of respondents. After the defining the objectives of the survey and establishing the sampling group, a questionnaire will be written. Questionnaires will be randomly administered to various consumers enquiring the most commonly used electronic equipment amongst them. In particular, this data will be collected in areas where the main branch is being opened as well as in the areas being targeted for business expansion. In addition, more information regarding different prices and the electronic equipments will be collected through the internet by searching the information from the websites of the already established electronic stores (Froy, 2009). Moreover, I will create a website with a suitable domain as well as a reliable webhosting service. The store website will enable me advertise the store through the internet. Therefore, this store will be advertised through the internet, whereby my business proposals will be posted on the different business websites and also through the social networks. Furthermore, this store will be added to the advertising segment of the Dubai electronic business pages. The advertising segment will contain full page editorial regarding the store, its location and some pictures of the store’s products. Additionally, Al Hammadi Store will have a direct link within the business links segment. By promoting this store on the business pages, the store will undoubtedly reap high dividends (Froy, 2009). License from Department of Economics Development In order to incorporate and register the store, the store’s registration application as well as the proposed name will be submitted to the Department of Economic Development (DED) < http://www.dubaided.gov.ae/English/reglcening/busreg/default.aspx>. Approval will be obtained from the licensing sector of the Dubai Department of Economic Development regarding the activities of the business and the trade name. The next step will entail notarizing the store’s memorandum of association within DED which will then be followed by filing the store’s document with DED and consequently I will be issued with trade license. Afterwards, I will register the Electronic Store with the Dubai Chamber of Commerce and Industry since this is a compulsory requirement. After obtaining the clearance to use the premises, I will prepare a name board in both English and Arabic. The fire and civil defense authorities along with the DED Licensing Department will inspect the premises (Eur, 2004). Cost of the electronic equipment store Electronic Equipments Store Cost of the Store Total/in DHS Rent 150000DHS per Year 150,000 License for the store from DED 50000DHS per Year 50,000 Internet connection and Land line 6500DHS 6500 Dubai Municipality permission 4300DHS 4300 permission for safety in civil defense 3000DHS per Year 3000 New account in DEWA for Electricity and water 5500DHS 5500 insurance deposit for DEWA 3000DHS 3000 visa's for employees:50 labors 2500DHS per employee 125000 Roofs and tables for the store 70,000DHS 70,000 Electronics Equipments 300,000DHS 300,000 Buy a system for set up a serial number of each product with price 9500DHS 9500 Salaries for each labors manager 20,000DHS per month 240000 each year Supervisor:2 10,000DHS per month 120000 each year Salers advisors: 5 5000DHS per one per month 60000 each year labors: 50 2000DHS per one per month 24000 each year each labor 1200000 for 50 labor per year Total cost: 2,370,800 DHS Labor: Skills required The electronic store will hire Dubai workers. The people hailing from the store site and more preferably to the worker to make sure that there is promptness and the workers can work overtime if necessary. Another crucial reason is that individuals from nearest locality can without difficulty transport with their expediency because the electronic store is small, the working force will be needed from town itself or its environs. On the other hand, the electronic store will provide assurance to the employees such as good working conditions; all workers will be treated equally and there will be discrimination and they will be entitled to holiday and sick leaves. The working hours are between 9.am to 5.00 pm and any worker who works for more than eight hours will be entitled to overtime, facilities for a conductive maintenance of their health inducements and a lot of other benefits necessitated by the labor code, as well as benefits provided by the electronic store as a company (Rosetta, 2008). Management aspects The electronic store will be headed by the general manager and he will be responsible for the overall control on the store employees, marketing of the electronic products within the store, as well as the allocation of budget for the electronic store. Along with the general manager is a secretary. The electronic store will also have the Human Resource personnel and under him there will be the utility driver, security officer in addition to the massager. Additionally, the electronic store will have marketing and sales personnel and under the marketing and sales personnel there will be the purchaser. Eventually, the finance personnel, and next to the finance personnel there will be the accountant, who will be categorized as retainer since he will be rendering service just once every end of the month (Rigney 2006). The required personnel will come from the close by places. As soon as the business starts the normal operations, all the benefits will be given to each and every employee. The electronic store shall hire more employees after operating for six years and this will be based on the projected increase of the store’s sales. The workers will be paid at a minimum starting salary and will be raised to ten percent yearly. The starting salary will be 5000 Dirhams, monthly. Marketing Aspect The proposed business idea is based on the perception that people within these regions have a difficult time in accessing electronic devices from nearby localities. The demand of the supply shall be based on the total population in these regions and the supply shall be based on the existing competitors in electronic stores. A market share of more than 50 percent is available for the electronic products within this region (Whitehead, 2005). The shop will stock types of electronics in which customers have loyalty. For example, apple products are very well trusted by customers and hence they are likely to be bought. Another marketing aspect will be value of quality; in this case, customers that value high-quality timepieces will be targeted. Since price is the fastest marketing aspect that can be regulated for any product, I will find out how often the price of electronic products changes. Accordingly, I will establish how well electronic products are priced to meet market conditions. In addition, financial news outlets for details on electronics will be monitored to see fluctuations in cost for electronic products in UAE. Finally, Al Hammadi for Electronic Products and Services will announce a new product launch through press release as a marketing aspect (Whitehead, 2005). Return on investment The financial requirements of the project shall be sourced from the personal savings as well as personal loans from the banks. The collective finances will contribute adequate funds for financing all expenses to be incurred during the pre-operating period as well as during the initial half on the year usual operations. All electronics from this store will be sold on cash basis and sales are on cash discount basis with term payment of 5/15 net 30. The liquidity ratios of this project are calculated to be 6:1, 8:1, 10:1, 12:1, and 15:1. On the 1st, 2nd, 3rd, 4th and 5th years, respectively, this illustrates that the project can liquidate its total present liabilities very adequately. The rates of return on investment for the initial five years of usual operations are 16.32%, 30.81% and 39.35% respectively. For as long as the return of equity is bigger than zero (0), the electronic store in particular earns income or, on the hand, breaks even.  Shortly stated, the firm operates within a constructive performance.  Therefore, the project is financially feasible (Rigney 2006). In order to compute the return on investment of this project, a local environmental data management system will be consulted in order to offer tangible and intangible technical and subjective benefits. In this regard, the database will be used in justifying the costs savings on the project. Below is the illustration of how cost savings for the electronic shop will be calculated. The electronic shop Cost items Software $10,000 Support (three years) 5,000 Total cost $10,000 Cost savings Data loading – save 50% of ten days annually at $80 per hour, for three years $15,600 Analysis – save 50% of four days per year at $80 per hour, for three years $10,600 Reporting – save 50% of four days per year at $80 per hour, for three years $10,600 Total savings $35,800 Payback – $11,520 ÷ 6,400 3.6:1 Intangibles Work quality Customer satisfaction Employee morale Would it possible to graph these and create a break-even-analysis? Expanding into GCC markets Al Hammadi for Electronic Products and Services will launch its plan to expand its operations and reach across the region after becoming a stable business. The first investment will be in Jordan. The aim of expanding the business into GCC markets will be to consolidate Al Hammadi for Electronic Products and Services’ market position and channel investment into Jordan’s thriving economy, and to extend the business’ range of service to the more demanding refined investors. Exploring developments within the electronic markets of Egypt, Jordan, as well as Palestine, which will attend to the present reinvigoration and ensuing challenges that these markets encounter, illustrate that non-domestic investment has risen for the past few years (Abu Dhabi Government, 2011). Jordan is one of the most vibrant within the region and makes quantum leaps on every day basis in regard to electronic business. The robust market position within Jordan can be allied to the country’s political stability, rising transparency in addition to strong potential for business expansion. In particular, Al Hammadi for Electronic Products and Services will continue to consolidate its presence within Jordan and at the same time the business will explore new alliance within the GCC and the likelihood of setting up a physical presence within major markets such as Dubai International Financial City. In a nutshell, the business will be fully committed to extend its reach to find new investment openings and alliance, expand the customer base, close in capital to the region’s thriving markets as well as share the expertise within the region (Abu Dhabi Government, 2011). Recovering the business’ Investment In this project, there will various ways of recovering the investment. The funds saved through project will either be kept and this will make a direct contribution to the shop’s bottom line or some or all the money saved can be passed on to the customers and this will create a competitive advantage, for the company (Whitehead, 2005). Measuring and managing customer satisfaction Identifying the electronic shop’s customers The fist step will be identifying the electronic shop’s customers. The main purpose of this is to establish a level whereby the business will be able to generate consistent and practical measures of service performance. Once the electronic shop is set, all the customers will be identified. This will be done through collection of all the relevant information to describe the relation of all clients to the business. For instance, how much business the customers offer, their location as well as the industry they are in and such. As a result, this information will be used in defining market segments that cluster comparable customers together. The result will offer a defined segmentation of the business’s customer base and then a customer frame will then be selected as the representative sample for the survey (Stacy, 2008). Understanding the needs of the customers A survey will be carried out to obtain inside information regarding the customer needs and behavior. The will entail understanding the needs of the customers. The function of this will be to establish how the customers at the shop define quality of service and hence what is supposed to be measured in order to monitor the quality of service. In this step, qualified researches will be recruited to guarantee reliability as well as validity of the information that will be collected during the survey. A suitable method for the exploration of what customers feel regarding the services and the products from the shop will be chosen. Afterward, a small number of customers from all market segments will be selected and they will be invited to take part in the research. Lastly, the research outcomes will be summarized to establish the most important attributes of the shop’s services and the products. The result will be a list of about ten key service and products attributes which collectively make up how the business’ customers define quality of service and products (Stacy, 2008). Measure the customer performance The key purpose of this step is to establish the priority areas that the business will focus on in order to improve the quality of the service as well as products and consequently improve business performance. The process will include enlisting of qualified researches to guarantee reliability as well as validity of the information that will be collected. A suitable method will be selected to obtain measures from the business’ customers, for example through phone interviews, face to face interviews and also as mentioned before by completing questionnaires. The next step will involve deciding on the supplementary information that could be needed from the customers in order to interpret their satisfaction and this encompasses, size, industry, or geographical location. Additionally, a measurement tool will be designed, for example a research questionnaire. Accordingly, a sample of customers will be chosen from the customer frame and the research outcomes will be summarized in order to construct measure of business performance. The results will be the overall customer satisfaction with the business’ services and products (Jack, et.al, 2006). Focus on priorities According to Stacy (2008), the purpose of this is to keep away from wasting business’ valuable resources and rather focus these resources on developments and changes that will produce the highest improvement within overall customer satisfaction. The process will entail paying attention to the areas that show enormous customer dissatisfaction and if need be, customer follow up will be carried out to get a deeper insight into how customer satisfaction can be improved best. The result will be a clear and a well defined direction for improvement. Improve the business processes The purpose of this is to translate the customer satisfaction priorities into action that will facilitate future increases within customer satisfaction. The process will entail identification of the business’ core procedure that have an effect on the customer satisfaction priorities. Setting up of improvement teams will be necessary in order to track and analyze the business process to establish the particular processes that require improvements and then the efficacy of these improvements will be monitored. The result of this will be that the business will have processes that are better aligned to serving the customers and more importantly there will be customer satisfaction (Stacy, 2008). Basically, research will be used in collection of objective information and the information will be obtained directly from the customers. The outcomes will have a direct effect of the satisfaction of the customers and will also support: Business plans to bring into line business goals with customers. Performance measurement by identification the non-financial performance results requiring tracking. Employee relations plans, to assist in directing the customer focus of the workers. Marketing plans to always maintain the customers and establish openings for new customers (Stacy, 2008). Labor standards in UAE The legal employment tenures in contracts The labor laws provide two kinds of employment contracts, namely; limited employment contracts, which refers to contracts for a given time period within precise instigation and conclusion dates and unlimited contracts, whereby the worker goes on working for the employer from a particular date until such time as the employment contract is ended by either party following prior notice (Leonard, 2011). Stipulations on the probation period During the probation period, the employer or the worker can end the employment contract abruptly the employer being held responsible for paying end of service gratuity or the worker, compensation for damages. The maximum period for probation is six months. The same employer is not allowed to employ any individual on probation, more than one time (Leonard, 2011). Wages in accordance with the law Wages refer to the payment to the worker for his services, in terms of cash or in kind; yearly, monthly, weekly, hourly, productivity linked. The wages should take in cost of living allowance, incentives in acknowledging honesty or efficiency, as long as the incentives have been specified within labor contract or within the set up of the business’s internal regulations (Leonard, 2011). According to new labor laws in UAE, worker under skilled level 1, those with Bachelor's degree are supposed to be paid a minimum of Dh12, 000 monthly. Workers under skilled level II, who are diploma holders are supposed to be paid a minimum of Dh7, 000 while employees with high school education are supposed to earn a minimum of Dh5, 000 (Sonukatha, 2011). Prescribed working hours The limit of approved working hours for the adult workers is 8 hours or 48 hours per week. Nevertheless, the working hours can be raised to 9 hours per day if the workers are in employments such as trade. For each service year, a worker should have a yearly leave of not less than: Two days leave monthly in case his/her service is more than 6 months and less than a year. Thirty days yearly if his/her service go beyond one year. At the end of the service, the worker is supposed to have a yearly leave for the percentage of the preceding year he/she spent in service (Leonard, 2011). Records that an employer is supposed to maintain Any employer having five or more workers in his service is supposed to adhere to the following; Keep a file for each worker with his/her name, trade, age, nationality, residence location, marital status, date when the worker started his/her job, salary, leave, sickness and injuries, and the date when his/her services were terminated and the reason for the termination. A “leave card” for each worker to be kept in the worker’s file. A record of payroll indicating the names of the worker in accordance with the recruitment date together with the appropriate allowances and also the duration of service and the date when his/her employment will cease. A record for occupation injuries or diseases. The fundamental rules and regulations for employment are supposed to be exhibited within a permanent, visible location, at the work locality indicating the essential work regulation including working hours and the appropriate safety precautions to evade work hazards as well as fire hazards. The execution of the regulation as well as any modifications thereto should be approved by the department of labor in thirty days from the date they were submitted. The business’ rules regarding to disciplinary actions should be permanently exhibited within the work place. This is supposed to show the disciplinary actions which might be taken against the employees violating the regulations (Leonard, 2011). Jurisdiction & the authority of the labor inspectors In UAE, a labor inspector has the authority to carry out the following activities in a business; Supervise the appropriate implementation of the provision of the labor law particularly in regard to employment wages and workers’ protection when carrying out their jobs and whatever is allied to their health and safety. Giving employees as well as employers the information and technical guidance that will facilitate adoption of best ways of implementing the provisions of the law. Recording events where a given business enterprise violates the provisions of the labor law (Leonard, 2011). Schedule Al Hammadi for Electronic Products and Services is anticipated to take about four months from business approval to launch the shop. Some foundations for this platform are already available, such as the location of the shop as well as the starting stock. Below is a high level schedule of some important highlights for this project: 1st January, 2012: Initiate project 1st February, 2012: Business opening meeting 1st March, 2012: Complete business’ premises activities 1st April, 2012: Complete all the legal requirements and permits 1st May, 2012: Complete the recruitment of the workers 1st June, 2012: Have the beginning stock ready 2nd July, 2012: Launching of the business Activities Months (2012) Jan 1st Feb 1st Match 1st April 1st May 1st June 1st July 2nd Initiate project Business opening Complete business’ premises Legal requirements recruitment of workers beginning stock ready Launching of business Project evaluation The electronic store is aimed at providing electronic equipments at these localities at fair prices and with decreased transport costs. The business venture will provide a great contribution to the government since there will be money that will be generated in form of taxes. The taxes may be paid in various forms. Through the introduction of this business, customers will be offered more choices for the same products. The suppliers of these electronics can increase its profitability. The competing products can also reduce their procedure due to the increased number of competitors in electronics business. Furthermore, unemployment within this region will decrease through providing employment to people when they will be hired and this will improve their lives and the society at large. Lastly, the customers’ feedback will be important for the business because it will facilitate the delivery of services and product design to align with the needs and expectations of the customers. Accordingly, the objectives of establishing this business have been met which include obtaining the license, hiring employee, promoting the shop, satisfying the needs of the customers and collecting the information about electronics equipments and prices. With the objectives having been met, Al Hammadi for Electronic Products and Services can be started and launched successfully. References Abu Dhabi Government. (2011). Business in Abu Dhabi. Abu Dhabi: Abu Dhabi Government. Eur, P. (2004). Far East and Australasia. New York: Routledge. Froy, S. (2009). Designing local skills strategies. New Delhi: OECD Publishing. Jack, B, et.al. (2006). The QFD handbook. New York: Wiley. Lou, C. (2005). Quality function deployment : How to make QFD work for you. Reading, Mass.: Addison-Wesley. Leonard, B. (2011). Brooklyn Streetcar Feasibility Study: Case Study. Portland: DIANE Publishing. Lueken, C. (2011). Chamber of Commerce, Dubai, UAE. < http://www.360cities.net/image/chamber-of-commerce-dubai?utm_medium= >. Rosetta, W. (2008). Electrical Stores, Volume 40. Michigan: University of Michigan. Rigney, J. (2006). Training corrective maintenance performance on electronic equipment with cai-terminals: feasibility study. 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