3.

0 INDUSTRY ANALYSIS

The sales value of cafs in 2014 was about RM 5,938 million and reached RM 6,120
million in 2015. The cafs industry showed a growth rate of 29.6% from year 2010 to
2015 (Euromonitor International 2016). In general the outlook in caf/bars industry is
good and positive for our business to start up and expand.

3.1 PEST ANALYSIS

Political and Regulatory Changes

Malaysia is a multi-party democracy country. The ruling Barisan Nasional

party has been in power over 25 years which provided the country with a high degree
of stability. This is important in creating a favourable business environment
(Buravytska 2013). The implementation of Goods and Services Tax starting from 1
April 2015 to replace Sales and Service Tax in Malaysia was announced by the Prime
Minister Najib Razak during the government reading of the 2014 budget (Wikipedia
2017).

According to the report by the Retail Group Malaysia, the implementation of GST had
negatively impacted the local retail business as it has been slow down in the first six
months due to consumers wait-and-see attitude on the prices of goods and services.
In contrast, firms in the food and beverage industry is unlikely to be affected by the
negative impact of implementation of GST since food and beverage provided by the
industry are considered as a necessity for consumers which can be seen from the hike
of Nestle (M) Bhds share price after its stock being laging behind the rest of the
companies in the same industry for the entire 2014 (Eugene Mahalingam 2015).

Economic Factors

There is a steep decline in the value of ringgit against the US Dollar after the US
presidential election on 8 November 2016 (Intan Farhana Zainul 2016) which was
triggered by a large sell-off of emerging market government debt, as investors expect
higher interest rates and reduced imports from Asia under Trumps presidency
(FocusEconomics 2016). The Rakyat Post reported that the ringgit touched 4.50 mark
against US Dollar on 4 Jan 2017 which was the weakest exchange level since 1998,
during the Asian financial crisis.
HLIB Research said the strong US dollar would be positive for sectors such as rubber
product manufacturers and technology companies. However, it is negative for sectors
such as automotive, aviation, telecommunications, consumer and power (Intan
Farhana Zainul 2016). As a result, this has affected the confidence level of
consumers spending in consumer foodservice industry. Thus consumers will prefer to
make their own meals at home and eating out less, or comparing potential dining
places and choosing the more affordable one (Euromonitor International 2016).

In order to increase the consumers spending on our caf, we will provide an

affordable price of ice cream and desserts. The details of the sales price can refer to
the section of financial projections.

Social Factors

A 5% current value growth in 2016 for ice cream and frozen desserts indicated
that the Malaysian consumer increasingly crave for ice cream and frozen desserts due
to the tropical weather and the consistent addition of new flavour in the market. For
example, the new flavour, Magnum Pink and Magnum Black Espresso, introduced by
Magnum on 2016. However, the sales of ice cream by leading flavour for Chocolate
and Vanilla have the first and second rank respectively form year 2011 to 2016
whereas the fourth rank was strawberry flavour (Euromonitor International 2016).
Besides that, lifestyle changes also contributed to the growth of cafs/bars in 2015,
especially youngsters nowadays like to spend money and time in cafs for studying,
discussion or just simply enjoying the special atmosphere in the cafs (Euromonitor
International 2016).

Our caf will introduce ice cream of both the main flavour such as Strawberry,
Vanilla, Chocolate, Yam and Mint and special flavour like onions, coconut milk,
fruits, oats, tea and etcetera. The main flavour introduced to tailor for popular taste of
public whereas the special flavours introduced to attract consumers attention and
increase our businesss popularity since people like to experience new things. We will
also introduce seasonal flavour such as durian and mangosteen during the durian
season.

Technological Factors
 There are 89.3% of Internet users used smartphones to access the Internet in
2015 while the percentage of smartphone ownership among Internet users rose from
74.3% in 2014 to 90.7% in 2015 based on the survey conducted by the Malaysian
Communications and Multimedia Commission (MCMC) (See Tho 2017). According
to a report on website We Are Social, Malaysians spend an average of 5.1 hours a day
on the Internet and 2.8 hours on social networks (Daphne Iking 2017). 79.6% of
internet users state that their main type of internet activity is getting information about
goods and services in year 2015 based on the survey report published by Department
of Statistics Malaysia in 2016.

These technological trends allow consumers to access to information such as new

menus, food reviews, food recommendations, promotions or campaigns and even new
restaurant or new food brands established on the market easily. Besides, it is a trend
for young consumers to post food photos online for sharing and indicate what place
they have been visiting via social networks. As a result, more consumer foodservice
operators prefer to adopt online method to stimulate business performance and
propagate their brand name through websites, mobile applications and social media
like Facebook, Instagram, Twitter and blogs (Euromonitor International 2016).

On the other hand, due to hectic lifestyles in cities and urban areas, online
food delivering becomes a highly efficient, time saving and more convenient way to
have meals (Euromonitor International). There is a slight increase of 0.2% of sales in
consumer foodservice by online from 2014 to 2015 (Table 6 Sales in Consumer
Foodservice by Online/Offline Ordering: % Foodservice Value 2013-2015) and it is
forecasted that the number of active paying consumers in online food delivery
segment in Malaysia will be 3.28 million in 2018 (Schreiber 2016).

U & Me Caf will take these advantages to establish our popularity and
promoting our products and services. We will create official websites on various
social media networks and a mobile application in order to update our consumers
about our promotions, products and services offered, menus, and related information
about U & Me Caf. U & Me Caf also allows our consumers to order food through
online and provide delivery only within Selangor area.
3.2 POTERS FIVE FORCES MODEL

Threat of New Entrants

When the number of new entrants increases, the average industry profitability
will decrease due to high competition. However, this threat can be reduced by
establishing barriers of entry. In general, the start-up cost for caf is low as compared
to other business. Although there is a slight product differentiation in the industry,
however, there are many close substitutes in the market. On the other hand, the
distribution channels can also be easily access since most of the cafs sell their
products and services directly to their consumers.

To reduce the threat of new entrants in future, our caf will have a unique
selling point which is introducing new flavours of ice cream and special homemade
desserts which hardly can be found from other caf or even ice cream and frozen
desserts retailers. New entrants have to be more innovative and creative in setting
their menus in order to compete head to head with U & Me Caf. As a result, the
threats of new entrants is reduced and remained low.

Threat of Substitution

The threat of substitution is moderate because there are few direct competitors
such as llaollao, Baskin Robbins, Tong Pak Fu, Moo Cow Frozen Yogurt, Morellis
Gelato, Hagen-Dazs, Sangkaya, Mammamia Gelato Italiano and Inside Scoop
(Foursquare 2017) which are selling ice cream and desserts similar to U & Me Caf.
There is a high availability of substitute products and thus, the willingness of our
consumers to pay for our products might be reduced. However, there are still a certain
degree of differentiation among the products offered by competitors in term of food
taste, food quality, service quality, shop environment and etcetera. To differentiate
ourselves from other competitors, our caf will be having more variety of flavours on
ice cream which fit the local culture and also desserts buffet.

Rivalry among Existing Firms

The intensity of rivalry among existing firms is relatively high as there are
3942 caf outlets in Malaysia in year 2015 based on the report of Euromonitor
International. Beside the direct competitors mentioned above, there are some other
indirect competitors such as PappaRich and Old Town White Coffee. Most of these
competitors are having a well-known brand, so, it is difficult for U & Me Caf to
compete against those firms within the few years after the commencement of business.
In order to reduce the intensity of rivalry, we will charge a relatively lower sales price
for the products as compare to more established competitors and have promotion on
the right time. In addition, U & Me Caf will be more customer-orientated to keep
improving the service quality.

Bargaining Power of Buyer

Since U & Me Caf is not retailing its products, there is no large buyer who
buys in large quantities and our target customers are within the general public. The
possibility that the consumers suppress the profitability of our business is fairly
moderate. This is because U & Me Caf is emphasising on offering healthy
homemade ice cream and desserts which are suitable for people of all ages.
Consumers nowadays are adopting healthier eating habits and more aware to the food
they consume, especially sugar intake since government launched campaigns to
combat the increasing rates of obesity and diabetes in the Malaysia
(Consumerlifestylesinmalaysia). As a result, the bargaining power of the buyers will
be moderate.

Bargaining Power of Supplier

Most of our ingredients used are agriculture products such as eggs, milk, flour,
sugar, fruits and other essential ingredients which will be buying from distributor in
large quantities and these products do have some similar substitutes. Additionally,
there are quite a number of distributors for agriculture products and hence the
bargaining power of suppliers is reduced. Other than that, there are also plenty of
wholesalers who supply for other ingredients that the caf needed such as the toppings
and drinks. In overall, the bargaining power of supplier is moderate.

5.0 MARKETING PLAN

Product Strategy
Ice cream with topping will be the main product sell by U & Me Caf. The ice
creams price is based on scoop. The ice cream flavours will be specify into three
types: common, special and seasoning. Common flavours involve: vanilla, chocolate,
strawberry, yam and mint. Special flavours involve: onion, oats, sesame, pumpkin,
green tea, yogurt, lime, black tea, banana, mango, watermelon, honeydew, coconut
milk and grape. Seasoning flavours involve: durian and mangosteen.

Topping for the ice cream include chocolate syrup, caramel syrup, strawberry syrup,
Oreo, cherry, strawberry, banana, raspberry, rainbow sprinkles, chocolate sprinkles,
peanuts, sliced almond, blueberry, gummy bear, gummy worm, pineapple,
marshmallow and M&M.

Other products will include drinks like soft drink, coffee, chocolate, tea, fruit juice
and yogurt drinks, and dessert like ice cream cake, ice cream mocha, ice cream biscuit,
ice cream lollipop,mini size ice cream and drinkable yogurt ravioles.

U & Me Caf will serve total 10 flavours every day. Common flavours will be serve
constantly and special flavour will be serve randomly. Seasoning flavours ice cream
will be serve from June to August.

U & Me Caf has the new flavour ice creams which are onion, oats, sesame, pumpkin,
black tea and coconut milk. The ingredients use for ice cream are home made and
more healthier compare with other ice cream shops which most of them have use
cream as one of the ingredient but U & Me Caf has exclude the cream that contain
more fat.

Price Strategy

The method used by U & Me Caf is based on value-based pricing. The list of price in
this method is based on how much consumer willing to pay. Though so, U & Me Caf
still can get 35% of profit per year by selling all products.

U & Me Caf can compete with other ice cream shops because of products will sell in
affordable price that consumer willing to pay which is cheaper than other ice cream
shops like Baskin Robbins, Haagen Dazs, and Tutti Fruitti. In the ice cream industry,
price of ice cream serve by U & Me Caf is average.
U & Me Caf can also compete with other caf shops like Magnum Caf which also
sell ice cream as its main product because our ice cream price is still cheaper than
Magnum Caf although it has a brand name.

Consumer will get discount and free delivery when buy a minimum RM250 of ice
cream. If consumer buy RM250 of ice cream, U & Me Caf will discount 10% which
is RM25 for the consumer.

Promotion Strategy

U & Me Caf will promote our products through social media and leaflets. We will
use Facebook to open a main page and share our products to the public. We will also
print out 50,000 of leaflets which cost RM 2853.

U & Me Caf will promote 300 Lucky Egg every Friday in a price of RM10. We will
let customer to choose 5 flavours of ice cream they like. We put one of the flavour
and let them guess. If them guess right we will give away an ice cream lollipop as the
prize. In this way, we may sell RM10 and cost RM5.50 per egg and we may earn
RM1350 per week. In a month we will earn RM5400.

In the first 3 months of business start, U & Me Caf will give 10% discount for our
special flavours ice cream every weekday. It is to encourage consumer to buy the
special flavours ice cream. Special ice cream in a day will be sell 5 flavours, if one
flavour is 500 scoops, then it will be 2500 scoops per day. 2500 scoops is sell RM3.50
per scoop and its total will be RM8750 but if have discount 10% then we will only get
RM7875. If the total costs per day is RM4825, then the profit earn will be only
RM3925. In a month, we will only get RM78500.

U & Me Caf promotion can attract the youth, adults and kids because of the Lucky
Egg Promotion. It can let people have fun by guessing the flavours and can eat with a
happy mood.
Place Strategy

U & Me Caf will open shop at Wangsa Maju which is 1200-1600 Square Feet and
has a cost of rental about RM4000-5000 per month. Our shop is located near to the
Tunku Abdul Rahman University College, Festival City Mall and Platinum
Condominium(PV). Our shop also near to the LRT station and the car park is free.

Although there are many dessert shop nearby U & Me Caf but we have confidence
that we can still attract a lot of people especially college students. It is because our
products are more attractive to the youths.

7.0 FINANCIAL PROJECTIONS (II)

Fund means all the financial resources of a firm, such as cash in hand, bank balance,
accounts receivable. Funds also defined as working capital or cash. Any change in
this resource is reflected in the firms financial position.

http://www.businessdictionary.com/definition/funds.html

Source of fund

Source of funds of U & Me Cafe are come from partners, the investors which
also is the sleeping partner and bank. We will probably have a mix of different funds
for different parts of our plan. For example, we may be contributing office furniture
ourselves, getting a loan for purchasing major equipment, and getting a line of credit
for working capital. So, we need a large amount of capital to open a dessert cafe.

Our partners gather together for open a cafe. To open a cafe, we need about
RM130000 to RM160000. The partnership gather their money only RM20000. Then,
the partnership separate into two groups to collect the capital. One of the group need
to find some investors to invested the ice-cream business. They need to find more
investors to collect money above RM110000.
 The second group needs to borrow money from the Young Entrepreneurs
Fund. It is handled by SME bank, used as venture capital funds and working capital
for our cafe. Thats mean it is for new start-up business or developing the existing
business. The criteria of application are slightly lower and the application process is a
bit lengthy. The aged of applicants must between 18 to 30 years old and must have the
certificate qualification. If the applicants who want to apply this scheme without the
vocational certificate, they need to attend a training which conducted by SME bank
and get the certificate after complete the training. The financing limit of Young
Entrepreneurs Fund minimum is RM20000 and maximum finance is up to RM100000.
The interest of this fund is 5 percent.

https://foundermethod.com/malaysia-government-loans-grants/

If the second group of partner can apply the loan with the SME bank from the
Young Entrepreneurs Fund, which we hope to borrow for RM50000, then the first
group will need to find the investors to obtain the fund for about RM 60000 and above.

Uses of funds

There are some various purposes for uses of funds. We need money to start up
a business, including costs of deposits for rent and renovation, buying new furniture
& fixture, motor vehicle, kitchen equipment and other start-up costs.

We are going to open a cafe at Wangsa Maju which is 1200-1600 square feet
and has a cost of rental about RM4000 - RM5000 per month and RM48000 -
RM60000 per year. We have to spend about RM60000 on the renovation for the cafe
so that the cafe look warmth and comfortable. For the kitchen equipment in the cafe,
our budget is RM66000. We will book some ice-cream maker machine, coffee maker
machine, freezer, baker and other machine to produce our product.

Besides that, we will also buy 2 - 4 motor vehicles for delivery order. This can
help us to increase the sales. We also order some special furniture & fixture increase
features of the cafe, the price are not above RM50000. After the furniture and the
machines have been set up in the cafe, we will commence our business. The profit we
earn will pay back the bank loan by instalment.
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