Al Mahara Training & Development Centre’s Analysis

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Introduction

Military employees in a local organization have grossly limited personal training and development services to be more effective. The Al Mahara Training and Development Centre will have a specified range of personal training and development services, specifically designed for employees on efficiency skills and career development. The centre will also have a dedicated training team to help this group acquire important work-related skills (Blythe 2006). Within the town of Umm Al Quwain, there is no single training and development centre targeting employees. The proposed Al Mahara Training and Development Centre will incorporate special needs for the employees to ensure that they are empowered to proactively manage their career and maintain optimal productivity at individual and corporate levels. Hence, the business idea is likely to cure this problem by providing the employees of local organizations the opportunity for optimal performance and career development.

Description of Business

The proposed Al Mahara Training and Development Centre will offer training and development services to employees of local organizations in the UAE, Umm Al Quwain region. The business will offer life skills and career development to the employees to optimise their output and satisfaction. The business will be operated by three partners owning equal shares. The business is designed for local organizations within the Umm Al Quwain who cannot afford private programs. The business will be located in the downtown district within Umm Al Quwain. The proposed business will enter the Umm Al Quwain training and development market at the beginning of the year 2016. The company intends to control 10% of the market within three years after entry by offering affordable prices, quality services, and dynamic platforms for offering the training and development services to the employees of local organizations.

Product & Services

The Al Mahara Training and Development Centre will offer the latest and most sophisticated interactive employees’ development training that may motivate the personnel in performing beyond expectation and develop their careers. The centre will have interactive personalised t training, lifestyle coaching, and continuous monitoring to guarantee its effectiveness. The Al Mahara Training and Development Centre will have a specified range of team building activities such as physical exercise, counselling, empowerment, and personalised support specifically designed for employees of the local organizations.

Market Analysis

External market analysis

The external market analysis was carried out through the PESTEL, which reviews the political, economical, social, technological, environmental, and legal aspect of the business environment for the proposed Al Mahara Training and Development Centre.

Political

The business environment in Umm Al Quwain is transparent and predictable. The taxation regime and rules in the country are clear and concise. The political climate in the UAE is also serene with no major problems. This environment will make it easy for the entry of the Al Mahara Training and Development Centre (Cone 2011).

Economic

Economically, the country is recovering from the effects of the global financial crisis and it is yet to grow exponentially. However, the economic recovery offers the Al Mahara Training and Development Centre potential for increased activity as many organizations will embrace the subsidized employee training services that are customised (Cone 2011).

Social

The demographic nature of the Umm Al Quwain region is such that the district has a population of close to 100,000 employees who need training. Close to 30% of the population fall within the criteria that the Al Mahara Training and Development Centre is interested in (Central Department of Information and Statistics 2015).

Technological

The Technological environment in the UAE is still very young. Most of the technology is imported from Europe, East Asia, and North America. Hence, there is a huge gap in the introduction of technological advances in training services. Since the proposed Al Mahara Training and Development Centre will be equipped with the best technology monitoring response to employee training, the business is expected to penetrate the market within the shortest time possible (Mariotti 2007).

Legal

The legal environment in the UAE is relatively predictable. The kingdom does not have the porous nature of a democracy where laws are constantly changed. The country is more inclined to values than laws. Hence, the business will not have an unpredictable legal environment (Dagnino & Rocco 2009).

Environmental

The Al Mahara Training and Development Centre will operate in a business environment where major parameters are known. For example, the competitors in the business environment are bounded by the code of conduct. Therefore, the business will find it easy to shape its environment (Blythe 2006).

Internal market analysis

The internal analysis of the business was carried out through SWOT, which reviews the strengths, weaknesses, opportunities, and threats.

Strengths

The centre will offer specialized training and development for the employees within the district of Umm Al Quwain. The fact that it will also offer group bonding training will serve to increase its competitive advantage. Additionally, the centre will feature games and other products specifically designed for employees to guarantee fun and motivation in the process of participating in the program (Cheverton 2004).

Weaknesses

The targeted market is highly dependent on the company approval and funding. Hence, the marketing approach will employ the pull strategy to ensure that the local organizations are encouraged to buy group coupons for their employees. If the strategy does not work, the centre may experience low numbers of the employees turning up. Additionally, the cost of setting up the centre is very high because it will take at least three years to breakeven.

Opportunities

The population of employees in need of customised work related-training is on the rise. Hence, the centre will experience continuous business expansion. The centre will motivate more companies to enrol their employees to the programs. This is good for future business.

Threats

The existing internal employee training functions within the local organizations might want to expand their coverage and compete for the Al Mahara Training and Development Centre’s market. Many traditional internal training programs are very cost-effective since trainers are part of the personnel. Therefore, the proposed centre will have to create unique programs that cannot be offered by internal trainers within the local organization.

Opportunity Assessment

The methodology used to assess the opportunity for the Al Mahara Training and Development Centre business is the Five Dimensions Opportunity Model (FDOM) (Farris, Bendle, Pfeifer, & Rebstein 2010) summarized in the table below.

Criteria scale
Investment of capital and resources Low to high (0-20)
Risk degree Predictable to uncertain (0-20)
Return on investment Low to high (0-20)
Impact of change Low to high (0-20)
Timespan Short to long (0-20)

Investment

The Al Mahara Training and Development Centre will have a specified range of employee training services specifically designed for the personnel from the local organizations. The centre will require the highest start-up cost estimated to stand at AED 2.8 million.

Risk and Uncertainty

One element that allows risks to be minimized in a business is the proportion of the investment realized through the sale of tangible assets. It is estimated that 40% of the investment can be recouped through the resale of business if the business fails to pick up.

Return and Value Created

The first year is the only period when the business should expect losses; this is mainly due to the high initial cost of promoting the centre to gain customer confidence. Thereafter, the expected margin loss will be around negative 76%.

Impact of innovation and change

The Al Mahara Training and Development Centre will use new technology that is unavailable in the country and specifically designed for the employees from the local organizations.

Timescale

The business has a renewable life cycle and will produce returns indefinitely if successfully implemented. Moreover, concerning opportunity creation, the centre will try to expand into other markets such as mobile employee training services for organizations interested in the services of the Al Mahara Training and Development Centre and cannot send their personnel to the centralised training office.

Sales & Revenue

The business will sell each unit of service (career development, efficiency in service delivery, and healthy work culture) at AED 15 the business projects to sell at least 85,000 units per year.

The project sales for the five years are summarized below.

2016 2017 2018 2019 2020
Sales 1,275,000 1,338,750 1,445,850 1,545,850 1,645,850

Financials

Profit and loss statement

Al Mahara Training and Development Centre

Income statement

For the three year period ended 31st December,

2016 2017 2018 2019 2020
Sales 1,275,000 1,338,750 1,445,850 1,545,850 1,645,850
Less: Cost of Sales -522,000 (548,100) (591,948) (611,948) (621,948)
Gross Profit 753,000 790,650 853,902 953,902 983,902
Fixed Expenses:
Worker wages 186,000 195,300 210,924 215,925 220,924
Rent 99,600 104,580 112,946 115,940 116,948
Electricity and Other Utilities 17,040 17,892 19,323 20,230 21,330
Other Administrative Expenses 12,240 12,852 13,880 14,680 15,480
Sales Promotion 20,600 21,630 23,360 23,360 23,360
Total Expenses -335,480 (352,254) (380,434) (380,434) (380,434)
Operating Profit 417,520 438,396 473,468 486,468 493,468
Interest -53,400 (56,070) (60,556) (62,456) (63,560)
Depreciation -23,200 (24,360) (26,309) (28,304) (29,359)
Interest and Depreciation 76,600 80,430 86,864 88,640 89,844
Profit for the year before tax 340,920 357,966 386,603 395,653 399,453
Less: Taxation (30%) -102,276 (107,390) (115,981) (117,913) (118,951)
Net Profit 238,644 250,576 270,622 285,632 298,624

Balance Sheet Statement

Al Mahara Training and Development Centre

Balance sheet statement

As at 31st December,

Description 2016 2017 2018 2019 2020
Fixed Assets
Property, Plant and Equipment 348,000 365,400 394632 394632 394632
Less: Depreciation 23,200 24,360 26,309 26,309 26,309
Total Fixed Assets: 324,800 341,040 368,323 368,323 368,323
Current Assets:
Cash balance 431,270 452,834 489,060 489,060 489,060
Accounts receivable 89,250 93,713 101,210 101,210 101,210
Rent Advance 99,600 104,580 112,946 112,946 112,946
Total Current Assets 620,120 651,126 703,216 703,216 703,216
Current Liabilities:
Accounts Payable 70,000 73,500 79,380 79,380 79,380
Tax Payable 102,276 107,390 115,981 115,981 115,981
Total Current Liabilities 172,276 180,890 195,361 195,361 195,361
Net working capital 447,844 470,236 507,855 507,855 507,855
Total Assets 772,644 811,276 876,178 876,178 876,178
Source of Fund:
Long-term Loan 380,000 399,000 405,922 415,960 430,920
Capital 154,000 161,700 164,656 169,666 174,536
Net Profit for the year 238,644 250,576 255,622 265,623 270,622
Total Equity 392,644 412,276 423,259 435,257 445,258
Total Sources 772,644 811,276 823,178 856,177 876,178

Breakeven analysis

Breakeven point in units is computed by dividing fixed costs with contribution per unit. The calculation of breakeven point for the year ended 31st December 2020 is presented below.

Breakeven analysis

Cash flow budget statement

Al Mahara Training and Development Centre

Cash flow budget statement

For the five years ended 31st December,

The year 2016
Particulars Startup Quarter 1 Quarter 2 Quarter 3 Quarter 4 2016 2017 2018 2019 2020
Estimated Sales Units 6000 11500 13000 19,500 50,000 52,500 53,700 54,700 56,700
Sales Revenue 153000 293250 331500 497,250 1,275,000 1,338,750 1,345,850 1,398,850 1,445,850
Cash Inflow
Accounts Receivable 153000 293250 325125 465,375 1,185,750 1,245,038 1,344,641 1,344,641 1,344,641
Initial capital 154,000 0 0 0 0 154,000 161,700 174,636 174,636 174,636
Total debt 534,000 0 0 0 0 534,000 560,700 605,556 605,556 605,556
Total (A) 688,000 153000 293250 325125 465,375 1,873,750 1,967,438 2,124,833 2,124,833 2,124,833
Cash outflow
Accounts Payable 61100 143600 167200 175,500 547,400 574,770 620,752 620,752 620,752
Worker wages 39900 39900 39900 39,900 186,000 195,300 198,924 205,924 210,924
Factory Rent 24900 24900 24900 24,900 99,600 104,580 112,946 112,946 112,946
Electricity and Utilities 4260 4260 4260 4,260 17,040 17,892 19,323 19,323 19,323
Other Admin expenses 3060 3060 3060 3,060 12,240 12,852 12,950 13,060 13,880
Sales Promotion 8240 4120 4120 4,120 20,600 21,630 22,310 22,840 23,360
Interest 13350 13350 13350 13,350 53,400 56,070 58,536 59,545 60,556
Property, Plant and Equipment 348,000 0 0 0 0 348,000 365,400 374,662 384,692 394,632
Rent advance 99,600 0 0 0 0 99,600 104,580 106,946 109,946 112,946
Loan Repayment 0 0 0 154,000 154,000 161,700 167,636 169,636 174,636
Total (B) 447,600 154810 233190 256790 419,090 1,063,880 1,117,074 1,206,440 1,206,440 1,206,440
Net cash (A) – (B) 240,400 -1810 60060 68335 46,285 431,270 452,834 469,060 479,603 489,060
Opening balance 698040 794300 974555 1,281,960 496,155 431,270 439,834 446,874 452,834
Closing Cash 240,400 696,230 854360 1042890 1,346,245 431,270 452,834 469,060 479,603 489,060

Organization

The business will be managed by a team of six personnel. The roles of the management team are summarized in Figure 1 below.

The roles of the management team are summarized.
Figure 1: The roles of the management team

This team will be mandated with the role of expanding the business by at least 10% each year for the next five years. The expansion each year will involve the addition of space, recruitment of more clients, and introduction of more services. The five-year plan is summarized below.

  • By mid-2016, the Al Mahara Training and Development Centre will be a crucial spot in Umm Al Quwain for employees of local organizations.
  • By mid-2017, the Al Mahara Training and Development Centre branch will be opened in a neighbouring town in Umm Al Quwain.
  • By mid-2018, the Al Mahara Training and Development Centre will diversify and adjust the current products to accommodate the government agencies interested in improving the skills of their employees.
  • By 2020, the Al Mahara Training and Development Centre will open 4 more branches outside the district of Umm Al Quwain.

Exit Plan

The business is projected to breakeven at the end of the fourth operation year. Should this fail, the management will give the business an additional year after which an exit strategy will be plotted (Kotler & Keller 2012). The exit strategy will involve either selling the establishment at its current value by the year 2020 or partnering with the most established business as a franchise.

Reference List

Blythe, J 2006, Essentials of marketing communications, FT/Prentice Hall, New York.

Central Department of Information and Statistics 2015, Latest statistical releases, Web.

Cheverton, P 2004, Key marketing skills: strategies, tools, and techniques for marketing success, Kogan Page, London.

Cone, S 2011, Steal these ideas: Marketing secrets that will make you a star, John Wiley & Sons, New York.

Dagnino, G & Rocco, E 2009, Competition strategy: theory, experiments, and cases, Rutledge, New York.

Farris, P, Bendle, N, Pfeifer, P & Rebstein, D 2010, Marketing metrics: The definitive guide to measuring marketing performance, FT Press, Alabama.

Kotler, P & Keller, K 2012, Marketing management, Pearson Prentice Hall, New Jersey.

Mariotti, S 2007, Entrepreneurship: Starting and operating a small business, Prentice Hall, New York.

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