Games & Grounds Coffee House

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4. Micro industry

- Engine diagram including all components, list of processes and CSF. See Appendix 4.

- CARE. As suggested by Mullins (2003), management capacity is one of the key success factors for any businesses. This has been usually captured by four elements consisting of (1) connectiveness, (2) aspirations, (3) risk tolerance and (4) expertise. For the proposed business, these factors are highly favourable. In particular, in terms of connectiveness, the owner has several important connections in both the area of coffee housing and the area of compute gaming. This is so because my parents have had substantial experiences in running coffee houses in China and they for sure will share with me experiences in how to run these successfully. In the meantime, I myself am a great compute game player and have a very clear idea about what other players expect.

Next, in terms of aspirations, the business is extremely interesting to me and I hence have a very strong desire to start it. In other words, since I am passionate about both coffee and gaming, I do have a strong interest in the business and hence will not mind any difficulties that I may encounter when I start it.

In addition, I have a high level of risk tolerance and am willing to accept risk. My philosophy has been that risk should not be avoided but managed in a way that would turn it into business opportunities.

Finally, I have a great expertise in both coffee and gaming. The only thing I lack is probably management capacity since this will be the first time that I run my own business.

- Stakeholders. The key stakeholders of the proposed business will consist of (1) the owner, (2) the investors, (3) the employees, (4) the customers and (5) the suppliers (Black, Burton, Wood and Aaron, 2010). As suggested by Black et al. (2010), since these stakeholders have very different and even competing interests in the business, it is essential that these interests must be reconciled in an effective fashion in order to ensure the smooth functioning and operation of the business and therefore its success. For example, the ultimate aim of the owner may be profit maximization. This may be conflicting with the employees’ interests of having a great working environment and high salaries. As a result, there must be a right balance between these different interests to ensure that everyone will be happy and therefore work hard for the business.

5. Finance

- Cash flows. Given that the proposed business is a highly innovative idea, it is expected to generate significant cash flows once it has been in operation since the unique combination between gaming coffee is likely to attract a huge number of customers in an almost immediate manner. In addition, before the house is opened, the owner will do all the necessary marketing to make potential customers become aware of the business. After two years, the business is expected to generate a net cash flow of £1,755,999 which clearly makes it possible for the owner to make further investments (see Appendix 6).

- Cash positive time. The proposed business is expected to have positive cash flow from the very first quarter. This is so because after making all the initial investments by using the owner’s own capital and a bank loan, no further investments will be made while the business is expected to generate significant cash flows due to its highly innovative business idea.

- Breakeven units calculation. The annual breakeven units are computed to be 95,204 while the weekly breakeven units are 1,904 (see Appendix 5). It means the business will have to consistently serve a significant amount of customers (more than 130 customers every day) in order to reach these breakeven units.

- Payback. Given the business’ impressive sales forecast, it is expected that all the initial investments in fixed assets can be recovered in 5.6 months, as can be seen from Appendix 5.

- Risk analysis. There are several risk factors that may have a significant impact on the above finance analyses (Hisrich, 2011). These consist of internal risk factors (low employee morale, theft and fraud, appraisal costs, etc.) and external risk factors (market changes, cost increases, customer need changes and so on). These all have been shown to have a huge, negative impact on the business’ performance and hence its cash flow and profit forecasts. For example, for the proposed business, the internal risk factor of theft and fraud may be a particular concern for the owner given that the game stations are very expensive. In the meantime, low employee morale is a potential problem since employees will definitely work for long hours and may negatively affect the quality of customer service and hence satisfaction.

With regard to external risk factors, cost increases may impose a very significant concern for the business given that it has to rent a large space and has to make substantial investments in refurbishment. Similarly, appraisal costs also represent a significant risk factor since the business needs to replace game stations which are very expensive in a periodic fashion in order to ensure that it will only have the latest game stations for the sake of fast gaming speed and enhanced customer satisfaction.

6. Recommendation

- Evaluation of the business feasibility. Overall, the business idea is clearly very feasible since the market gap has been deemed to be significant and hence can lead to opportunities for large profits. The product is a very innovative idea and hence can meet customers’ increasing demand for entertainment well. In the meantime, the market for it is sufficiently large as the proposed location has a high level of foot traffic and hence a large number of potential customers. Equally important, the fact that the proposed business has no direct competitors in all cases would suggest that the potential for growth is great (Griffin and Ebert, 2010).

- Additional work for the feasibility study. To ensure that the current feasibility study is fully convincing, additional work is still required. This is so because currently it does not discuss with sufficient depth how the key potential challenges should be assessed and dealt with (Howell, 2012). In particular, it is assumed that the business will provide customers with latest game stations for the sake of fast gaming speed and hence enhanced customer satisfaction. However, taking into account fast changes in technologies and therefore the frequent introduction of new game station generations, doing so will certainly require huge investments and the current feasibility study