Asia Pacific University

Kagiso Teko Bikitshane TP022209

Table of Contents
1

Executive Summary............................................................................................. 2

Opinion of value................................................................................................... 2

Assumptions and Limiting Conditions..................................................................2

History of company.............................................................................................. 3

Services provided................................................................................................. 4

Education industry analysis and its impact on canteen business.........................5

6.1

Porters five forces......................................................................................... 5

6.2

PESTEL Analysis............................................................................................. 5

6.3

SWOT ANALYSIS............................................................................................. 5

Production process............................................................................................... 6

Customers Analysis.............................................................................................. 7

Suppliers.............................................................................................................. 7

10

Human resources.............................................................................................. 8

10.1 Job analysis.................................................................................................... 8

11

Description of facilities / Furniture and Fitting...................................................9

12

Equipment and Machine.................................................................................... 9

13

Financial Analysis............................................................................................ 10

13.1 Asset valuation: Book value method............................................................10

13.2 Market valuation method: The going market rate method...........................11
13.3 Income-based business valuation: Return on investment (ROI) method......12
14

References...................................................................................................... 13

15

Bibliography.................................................................................................... 14

16

Appendix......................................................................................................... 14

16.1 Industry analysis.......................................................................................... 14

16.1.1 Porters five forces................................................................................. 14
16.1.2 SWOT analysis....................................................................................... 15
16.1.3 PESTEL Analysis..................................................................................... 16
16.2 Financial statements.................................................................................... 17
16.2.1 Cash flow statement..............................................................................17
16.2.2 Balance sheet........................................................................................ 18

Table of figures

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Asia Pacific University

Table
Table
Table
Table
Table
Table
Table
Table
Table
Table

Kagiso Teko Bikitshane TP022209

1:Opinion of value............................................................................................. 2
2: service menu................................................................................................. 4
3: production process........................................................................................ 6
4: suppliers........................................................................................................ 7
5: job analysis................................................................................................... 9
6: furniture& fitting............................................................................................ 9
7 Assets........................................................................................................... 10
8; bookvalue.................................................................................................... 11
9 : market value.............................................................................................. 11
10 : ROI........................................................................................................... 12

1 Executive Summary
This is a business overview of the ABC canteen as proposed by my superiors. My
boss is looking at the possibility of buying the canteen business over from Mr
Bernard, as he will be relocating. In order to come up with this report, its required to carry out
certain tasks accordingly of which include among others, the analysis of both the internal and external
environment factor affecting ABC canteen operations, industry analysis of the company. A market
research is also required and would have to analyse different plans for the company including operational
plans, human resource plan, risks contingency plan and financial plan. Recommendation for risks,
finances, human resources and operations accordingly.

2 Opinion of value
As per the given information of the past five (5) year sales, There is a difference of RM200,000
in turnovers. So in my opinion as per the findings the canteen can be sold between RM 400,000
and RM 600,000. As described in the table below

Value of ABC University Canteen

Minimum Price

RM 400,000

Maximum Price

RM 500,000

Mr. Bernard Price

RM 500,000

Table 1:Opinion of value

3 Assumptions and Limiting Conditions

Assumptions made are as follows:

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Kagiso Teko Bikitshane TP022209

a) Assumes that the new owner(s) of the Canteen will have the necessary resources and
commitments to not only acquire, but also to grow the Company.
b) Assumption of the buyers knowledgeable and understanding about the Canteen and
its operations
Some of the liming conditions faced by the canteen are as follows;
The history and nature of the canteen business
The economy and the industry of the Canteen business.
Financial condition of the Canteen.
The canteen business associated risks.
The market.

Business Overview:
4 History of company
The Canteen is a shop which selling drinks, bake goods & food products to retail customers.
The Canteen buys and sells all of its products in a competitive marketplace. The Canteen has
proprietary product or exclusive rights to sell its product. There are several competitors within
the market range of the Canteen all selling similar products. Competition is based primarily on
price, location and name recognition.
ABC University has been in business for a long period offering educational services to
different students around the world; however, the University did not want to engage on food
services delivery to students. The University food business was and is serviced by external
vendors. Prior to Mr. Bernard operations, other different vendors had the opportunities but
numerous complaints from students about the lack of quality on the food and the whole service
kept on increase. This was a problem and from Mr. Bernard venturing for business, he met his
luck and struck a deal with the University. Mr. Bernard is a sole owner of the canteen business at
the ABC University. From the beginning, Mr. Bernard had to change the whole ambiance of the
food court to reflect the students expectations and after a while the University was impressed
with Mr. Bernard operations and this led to long term contract for him and being the monopoly
of the food sector. No other food service operated within 3 kilometers of the University and this
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meant a great deal for Mr. Bernard. Although, the canteen started operating earlier than that, it
was officially launched in 1998.
During the early times of canteen operations, Mr. Bernard lacked enough staff to service the
whole scale of students in the University and this meant he lost customers to different fast food
chains like Macdonald, Dominoes, Pizza Hut and KFC. The official times for the canteen were
from 7:00am to 19:00pm. His total staff number was 5 and the canteen did not have enough
variety of foods. Although, available foods at the canteen were finished by the end of the day, not
all students managed to be served. This summed up that Mr. Bernard had shortage of foods and
proper staff.
In 2001, the food were prepared from the canteen itself and never brought in anymore.
Besides, the student population kept on increasing to 5000 students from 3000 students. Overall
the eating student percentage increased to 40 percent out of 5000 students.
There was no major supplier and Mr. Bernard took fresh produce every morning from the market
and he mostly paid in by cash till later date when he established a relationship with other
suppliers that he was able to get discounts and pay end of the month.
By the year 2012, the canteen was the center of students breakfast, lunch and afternoon
tea. Staff had increased to 10 in number so as to match the growing demands from the students
and Mr. Bernard only took the managerial responsibilities while other duties like cooking and
cashier part was handled by the staffs. The canteen offered self-service and a la carte ordering as
well. The canteen was able to acquire discounts from the suppliers like Seasons Tea, Zesta and
other local fresh produce.

5 Services provided
The canteen provides two kinds of services; namely self-service and catering
service. ABC even extends catering service to a diverse clientele including private
agencies, individuals, government agencies, as well as big events like weddings and
celebrations etc.
The self service is whereby people serve themselves to their satisfaction with a
buffet provided by the company. This is in effect to the large number of students
and staff. Below is the menu sample of the food offerd

Beverages

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Breakfast

Lunch

Afternoon
Tea

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Coffee
Teh tarik
Season Tea

Kagiso Teko Bikitshane TP022209

Roti
Mee goreng
Oyster omelet

White Coffee Hot burger

Black Tea
Nasi lemak
Fresh juices

Roti jala

Nasi goreng
Tuna
ayam
sandwiches
Fried Chicken Chocolate
Cakes
USA style
fried rice
Chicken Rice
Fries and
chicken
Chicken curry

Table 2: service menu

6 Education industry analysis and its impact on canteen

business
This section looks in to the macro using PESTEL Analysis and micro environmental
analysis using Michael Porters five forces to analyse the near environment factors of the canteen
business. According to Michael porter (2011), the five forces analysis is most useful in
assessment of the competitive strength and position of an organization. This model consists of
competitive rivalry; threat of new entrants; bargaining power of buyers; bargaining power of
suppliers and threat of substitute products. More details are discussed below.

6.1 Porters five forces

Under this micro environmental section is Michael Porters five-force analysis. This
Porters five forces analysis is useful for assessing and analysing the competitive strength and
position on a business organization / corporation (refer to appendix)

6.2 PESTEL Analysis

This analysis is used for determining the opportunities and risks of global expansion. PESTEL
analysis is analyzed the important factors surrounding the environment of business organization that
might affect the business.(refer to appendix)

6.3 SWOT ANALYSIS

SWOT analysis is a framework to aid in identifying the effective elements in strengths weaknesses,
opportunity and threats in a firm. Using this framework it is possible to overcome the challenges in firm
by utilizing necessary resources (refer to appendix)
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7 Production process
The canteen serves students and staff with breakfast, lunch and dinner, the production
process is discussed below.
Location & Premises

Operating Hours

It operates throughout the day

between breakfast, lunch and dinner
from Morning at 10am 4pm

Sales

Turnover
$500,000
(Last year $450,000)
Net profit
$60,000 (12%)
(Last year $67,500 (15%)

Plant & Equipment

Inventories

Table 3: production process

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The canteen operates on a true leased

land contract with ABC university
It operates on a 5000sqft
(2000X3000sqft)
Dining Room = 3000sqftoccupies
60% of Total Area
Kitchen cooking and Storage area =
2000sqft (40% total area)

Plant and equipment is worth

$300,000
Depreciation at $ 30,000/year
Accumulated depreciation (5yrs) at
$150,000
Currently stores weekly supply of
items (10,000 units /day) for 10,000
students
Reorder level = (10,000units X 7days
= 70,000 units)

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8 Customers Analysis
According to Malaguio (2012), there are three well known leading market segments for
the food concessionaires and these are students, office employees and factory. In this three
segments Mr Bernard canteen is focusing on the students section, supplying ABC University
worth 10,000 students. The student segment has a high spending habits, As in nature students are
well known to be quite active people therefore be likely to eat more to replace lost energy in their
bodies, thus leads to high spending habits on food.
There are two primary aspects to be considered when performing a customer analysis,
namely; demographic profile and a behavioral analysis. Will be targeting the 18 years and older
demographic, mostly their income obtained from parents or part time jobs. Through this means
of earning money an average student income is about $300 - $500 per month (Nationwide.com,
2013). Food is basic necessity, Most college students spending habits revolves around food, this
target market is good for the business.

9 Suppliers
The canteen supplier market is highly segmented, therefore the canteen business has more
bargaining power on products.
Supplier
Joancan
composites
sdn.Bhd

Product
Kitchen equipment

AEON.SDN.bhd

Perishable goods

Table 4: suppliers

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Contact details
Johor, Malaysia
Total Revenue
US$1 Million US$2.5 Million
Kuala lumpur,
Malaysia
Total Revenue
US$3million

Terms of trade
Payment at every
year end

Payment at every
month end

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Kagiso Teko Bikitshane TP022209

10Human resources
Human resource development is quite important in sustaining the business growth,
therefore high focus should be put on the training and development of the employees (Hrsp.org,
2013).The current canteen staff are highly trained personnel and know how to carry out their
duties accordingly without much supervision. Below is a detailed job assessment of the key
competent jobs in the canteen industry.

10.1 Job analysis

ROLE& RESPONSIBILITIES
General Manager

a) Ensure company policy and Brand

Equity Standards are followed.
b) Optimize profits by controlling food,
beverage and labor costs.
c) Hiring, training and developing new
hourly team members.
d) Increasing sales by ensuring guest
satisfaction and prompt problem
resolution.
e) Maintain an overall management style
in accordance with our established
best practices.
f) Provide leadership and direction to all
team members to ensure efficient
operation.

Cook

Food & Nutrition manager

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g) Operates a variety of kitchen

equipment
h) estimate food requirements,
i) plan production requirements and
requisition supplies
j) Cleans and sanitizes work stations and
equipment
a) Supervises daily worker Shifts
b) Assigns work responsibilities

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c) prepares schedules, and ensures that

all shifts are covered
d) ensures units are stocked with
appropriate levels of nutrients
Cashier

e) Operates a cash register

f) Handles cash
g) customer service
h) operates equipment with peripheral
electronic data processing

Table 5: job analysis

11Description of facilities / Furniture and Fitting

The canteen has been in operational for about 15 years and its furniture and fittings are not
replaced yearly. The current ones have taken 5 years and so they appear not attractive but suite
the function of accommodating students. As illustrated below.
No
1
2

Furniture &
Fittings
Chair
Light

Quantity

Condition

200
20

Good
Bad

Description
No problem found
Need to change few light

Table 6: furniture& fitting

12Equipment and Machine

There are certain types of machines and equipment required in the canteen business to
ensure a smooth operation of the business. Some of the required equipment include:

Kitchen Fume Exhaust System

Kitchen Cooking Gas

Display Counters

Bain-maries

Kitchen Steam Cooking Equipment

Dining Furniture

Industrial Heavy Duty Tables

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Kitchen Work Tables

Racks and Trolleys

Kitchen Washing Accessories

Kagiso Teko Bikitshane TP022209

13Financial Analysis
13.1 Asset valuation: Book value method
Book value is the value of an asset on the balance sheet minus total depreciation, depletion,
or amortization. For an entire company (McNish, 2010), it is often viewed as total assets minus
total liabilities, often stated on a per-share basis. In this case, it is also known as shareholder's
equity
Assets = Liabilities + Equity
Assets

Quantity

Price

Refrigerator

RM50,000

Kitchen exhaust fume

RM30,000

Coffee Maker

RM20,000

Microwave

RM20,000

Stove

RM10,000

50 seated Table

10

RM1000

4 Seated Table

40

RM1000

2 Seated Table

20

RM1000

Sofa

RM3000

Chairs

280

RM1500

Air Conditioner

RM5000

Basin

RM5000

Lighting

20

RM200

Estimation assets value

10,000 items

RM300,000

Table 7 Assets

Book value = intangible Assets Liabilities

Asset = 300,000
As the asset is used up, it is worth less and less to the company, so its book value declines
over time.
Depreciation value/year = $30, 000, 00
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=300,000 -10000-0
200,000

Book value method

Enter:
Cost of asset
Accumulated depreciation (5yrs)

300,000.00
150,000.00

Output:
Book value

150,000.00

Table 8; bookvalue

Therefore, according to book value method the selling price of the canteen is estimated at
RM 150,000 but the owner proposed RM300, 000

13.2 Market valuation method: The going market rate method

In an efficient and open marketplace, price of a business should be easily
determined by reference to previous sales (McNish, 2010)
Company

Transacted selling

Price per person

Selling price

Paradise Cafe at

price
RM150,000

150.000/ 3000=

50x10,000student

RM50/student

s = 500,000

600.000 /15000=

400,000

Smart High School

(3,000 students)
Moon Cafe at

RM600,000

Twain University

RM40/student

(15,000 students
Wan Cafe at Pan
Corporation (6,000

RM400,000

400.000/6000 =

666,700

RM66.67/ student

employees)
Table 9 : market value

According to this information, the canteen price can estimated to be between RM 400,000
to RM 600,000.
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13.3 Income-based business valuation: Return on investment (ROI)

method
Return on Investment = net profit x (100%/ROI)
Accordingly, ABC Canteen turnover and net profit calculated for the last 5 years .The table
below providing few possibilities Return On Investment for ABC Canteen

Table 10 : ROI

The ABC canteen has an overall ROI of 20% ROI is chosen based on the following reasons;

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References

Brady, E., Cravens, D., Maister, D., Peter, J., Thompson, A. and Walker, O. 2007. Strategic
marketing. North Ryde, NSW: McGraw-Hill Custom Publishing.
Hrps.org. 2013. HR People & Strategy. [Online] Available at: http://www.hrps.org/ [Accessed: 27
Sep 2013].
Malabaguio, M. 2012. Business Ideas. [Online] Available at:
http://www.entrepreneur.com.ph/article/6-things-to-remember-when-running-a-canteenbusiness [Accessed: 23 Sep 2013].
Nationwide.com. 2013. College Student Spending | How Much Do College Students Spend? |
Nationwide.com. [Online] Available at: http://www.nationwide.com/college-studentspending-habits-infographic.jsp [Accessed: 27 Sep 2013].
Porter, M. 1980. Competitive strategy. New York: Free Press.
Ritson, N. and Marsden, A. 2003. Organizational management. Amsterdam: CIMA.

15Bibliography
Fine, L. 2009. The SWOT analysis. [S.l.]: Kick It.
Fitz-Enz, J. 2000. The ROI of human capital. New York: AMACOM.
Hamersveld, M. and Bont, C. 2007. Market research handbook. Chichester, West Sussex, England: John Wiley
& Sons.
The Motley Fool. 2013. Book value. [online] Available at:
http://wiki.fool.com/Book_value#sthash.3bBFurzK.dpuf [Accessed: 30 Sep 2013].

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16Appendix
16.1 Industry analysis
16.1.1

Porters five forces

Competitive Rivalry
According to the article there are no other competitors within the vicinity of the school,
therefore the ABC canteen business can operate freely as they will as its not faced with any
competition at all. The ABC Company has monopolised the canteen industry in the area as thus it has
more power on its customers. It can easily regulate the service prices to its advantage. Profits are
easily maximised in this case.

Threat of new entrants

ABC canteen is faced with threats of new entries to the market, so far the canteen market
doesnt have any limiting barriers to new entrants. The start-up costs are really affordable, therefore
other companies can easily penetrate the market and set up their businesses which could result in
losses to the ABC canteen sales. The government encourages and supports upcoming business to
operate at freewill without any barriers or restriction.
On the other hand Mr Bernards canteen is well positioned in the market as it offers
differentiated services and products. The company has been operating in the school for a long time,
and has won the confidence of the school management on its services and products. This gives Mr
Bernards canteen a higher competitive edge to new entrants as the school gives it more priority.

Bargaining power of buyers

Apparently Mr Bernards canteen company has dominated the canteen market in the area as it
is clear enough that its the only supplier of this kind of services in the area and there is not much
competition. The buyers are highly segmented in this industry. In order for the school to switch
suppliers it will incur high switching costs as costs of start-up and maintenance are high in the area.
The buyers in this case are left with no option but to stay with Mr Bernards Canteen Company. The
company is in control of its buyers, services and products.

Bargaining power of suppliers

The canteen suppliers are highly fragmented in the market and are independent ventures. If
suppliers are highly fragmented their supplying power is really low (Ritson, 2011). There is a diversity
of suppliers in the canteen market and mostly offer the same products. As thus switching costs are at
an affordable rate. Mr Bernards Company has the ability to switch suppliers easily and freely as there
are no legal agreements bounding it to any suppliers.

Threats of substitute products

There is a high threat of substitute products in the canteen market. This poses a serious threat
to the company, also due to the emergence of a lot of generic products sold at lower than market rate.

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Customers can switch easily without any restrictions to this new products. This can have a bad impact
on the company, therefore the company will have to reposition itself in the market to gain a competitive
edge.

16.1.2

SWOT analysis
Strengths

Strategic Location of branches

High quality food & beverages.
It has a good customer
relationship.

Weaknesses

Opportunities

16.1.3

Ability to expand to outside

market.
Ability to expand the number of
branches.
Ability to expand the market.

Threats

Competitors.
Increase of facilities rental.
Possibility of losing experienced staff.
Possibility of losing customers.

PESTEL Analysis

Political
The Malaysian economic growth is slow due to
political issues, this may lead to slow business in
the beginning of setting the business in Malaysia.
And this also lead to the changing of government
policy which may resulted all goods to be sold in
the market increasing the prices
Social
The Malaysian government has its own strict rules
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Limited leased space

The operational hours of the canteen
is limited by students activities.
ABC canteen does not deliver food.

Economical
Due to the current global financial crisis in
Malaysia. There is an impact on the foreign
exchanges. Due to this foreign currency
fluctuation risk effect, importing products might
become costly high for the business
Environmental
Due to deforestation and global

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in labelling & language used on the products that
sold in Malaysia. All local and imported products
must be written in Malay and / or English. And
products should be certified as halal to be allowed
in the market.

16.2 Financial statements

16.2.1

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Cash flow statement

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warming issues escalation, the
government has implemented strict
measures for new markets. The ABC
canteen has to follow suit. This has a
impact on developing new grounds for
business

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16.2.2

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Balance sheet

Kagiso Teko Bikitshane TP022209