INFS7040 Business Case My Sumo Group 5C PDF

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My Sumo Group 5C

THE AUSTRALIAN NATIONAL UNIVERSITY

Business Case Report My Sumo

Group 5C

Yiwei Xu (U4834608) Minjian Liu (U5506264) Kunlun Zhang (U5300114) 9th May 2014

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My Sumo Group 5C

Executive Summary 1. Sumo Salad is a fast growth health fast food store with successful franchises business model. This report is commissioned to examine the attainability of new app project for Sumo Salad, which intends to reduce waiting time and improve reliability and consistency of customers’ orders. 2. The objectives of this project are to provide support to the face to face customer service model thus neutralising part of the inadequacies that may present in the current system. The following key deliverable objectives are identified as follows: 

A massive reduction of error rate in customer’s orders by up to 90% within six months of implementation;



An upwards shift of customer retention rates of at least 20%;



Sustainable long term growth of profitability over the next 5 years.

3. The purpose of this business case is to identify how the proposed project will align with Sumo Salad’s objectives and contribute the broader goals of Sumo Salad in the long run. 4. A series of situational assessments were undertaken, including Porter’s Five Forces analysis, the SWOT Analysis, and Gap Analysis. Porter’s Five forces are likely to have an upward pressure towards profitability. SWOT analysis revealed weakness and opportunities that the project is likely to be able to support and capitalise. Gap Analysis concludes that the potential level that Sumo Salad could perform at positively outweighs the initial investment expenses.

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5. Necessary assumptions and reasonable constraints were taken into account while conducting this analysis. Assumptions are primarily related to the level of support that is provided from senior management in Sumo Salad (particularly funding and resources related), and the rates which is used to provide results as NPV analysis. Constraints are primarily IT and technical related, such as the availability of IT specialists and infrastructure required to undertake such work. 6. A series of options regarding the methodology to approach the current situation has been identified and analysed, and summarised as the following: a. Option 1 --- Do nothing, keep the current business situation b. Option 2 --- Build App, develop new channels of business. NPV analysis concluded that the development of the project (Option 2) is likely to result in an NPV that is approximately 4 times that of doing nothing (Option 1). 7. The purpose of this project is to increase revenue and decrease mistakes in any given order. The Primary output is a user-friendly mobile application, along with an efficient work process, and an improved brand reputation. This project will go through 4 phases with a budget prescribed in section 7.4. 8. The business case is prepared by Group 5c. The assignment distribution is described in details at the table found in the body of this report. All the relevant information for the case are gathered through interviewing the current employee Yi Xu (the group member), the manager of Sumo Salad located in ANU and the manager of Sumo Salad in Canberra Centre.

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Contents 1. Introduction/Background ........................................................................................6 2. Overview .................................................................................................................7 2.1.

Vision ........................................................................................................7

2.2.

Organisational Objective ..........................................................................8

3. The Business Case .................................................................................................. 8 4. Situational Assessment and Problem Statement .....................................................8 4.1.

Porter’s Five Forces analysis ....................................................................9 4.1.1. Threat of new entrants .......................................................................9 4.1.2. Threat of substitute products.............................................................. 9 4.1.3. Bargaining power of customers .......................................................10 4.1.4. Bargaining power of suppliers .........................................................10 4.1.5. Competitive Rivalry within an industry........................................... 10

4.2.

SWOT Analysis ......................................................................................10 4.2.1. Strength ............................................................................................11 4.2.2. Weakness ..........................................................................................11 4.2.3. Opportunity ......................................................................................12 4.2.4. Threat ............................................................................................... 12

4.3.

Gap Analysis ........................................................................................... 12

5. Assumptions and Constraints................................................................................ 13 5.1.

Assumptions............................................................................................ 13

5.2.

Constraints .............................................................................................. 14

6. Identification and Analysis of Options .................................................................14 6.1. 6.2.

Identification of Options .........................................................................14 Analysis of current business situation.....................................................15 6.2.1. Current business situation and component order system .................15 6.2.2. Benefit and drawbacks .....................................................................15 6.2.3. Cost of current Business system ...................................................... 16 6.2.4. Risks.................................................................................................17 6.2.5. Impact on Stakeholder ..................................................................... 17

6.3.

Analysis of the new order system and application..................................18 6.3.1. Components and function of the system ..........................................18 4

My Sumo Group 5C

6.3.2. Benefits and drawbacks ................................................................... 20 6.3.3. Cost of utilizing the new system ......................................................21 6.3.4. Risks.................................................................................................21 6.3.5. Stakeholder Impact .......................................................................... 22 6.4.

Recommendation .................................................................................... 23

7. Implementation Strategy .......................................................................................23 7.1.

Target Outcomes ..................................................................................... 24

7.2.

Outputs ....................................................................................................24

7.3.

Work Plan ................................................................................................25

7.4.

Budget .....................................................................................................26

7.5.

Organisation change and post project review .........................................27

8. Project Preparation ................................................................................................27 9. Reference .............................................................................................................. 28 Appendix A ..................................................................................................................30 Appendix B .................................................................................................................. 31 Appendix C .................................................................................................................. 32 Appendix D ..................................................................................................................33 Appendix E .................................................................................................................. 34

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1.

Introduction/Background

Sumo Salad is a fast growing healthy food franchise, specialising in customisable salads. Since the opening of its first store back in 2003, Sumo Salad has been successful in developing their business to a massive scale with 86 stores across Australia. With such development, certain insufficiencies are becoming increasingly apparent. One particular problem that could potentially limit Sumo Salad’s further development is with its current customer service model. In the past, Sumo Salads have experienced success with the traditional face to face service delivery model, with front desk staff taking orders through verbal communication. Due to the labour intensive nature of such model customers (typically those that orders soups or noodles) sometimes have to wait for 15 to 20 minutes before the product is ready. Mistakes in the customer’s desired Salad composition are also common. This has several adverse impacts on Sumo Salad’s business. Over time, returning customers were conditioned to choose not to order soups or noodles, and if other substitutes cannot satiate the customer’s needs, they would no longer return. Incorrect orders were often replaced at the store’s expense, which both increases costs and further strains the already limited staff time available to other customers. In face of such complexities, we recommend that a mobile phone application is to be developed to address these problems. Developing a mobile app known as “My Sumo” is considered to be able to, at least partially, resolve the problems mentions above.

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Through using My Sumo, customers are not only able to make orders in advance for in-store pickup, but can also get access to a range of supportive features, such as being notified of the latest special offers, find the nearest store and manage their membership. Due to connecting with the mobile app, the physical stores are required to install terminal devices to show the orders that customers requested, so that potential risks of confusions due to verbal communications can be mitigated. 2.

Overview

2.1.

Vision

The objectives of this project are to provide support to the face to face customer service model thus neutralising part of the inadequacies that may present in the current system. Under certain attainable support, this project would help the company to resolve the potential operation threaten and risk in order to meet and achieve company objectives. The following key deliverable objectives are identified as follows: 

A massive reduction of error rate in customer’s orders by up to 90% within six months of implementation;



An upwards shift of customer retention rates of at least 20%;



Stable and sustainable long term growth of profitability over the next 5 years.

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2.2.

Organisational Objective

The long term objective of Sumo salad after its acquisition is open 200 more stores over the next 5 years. As a franchises business, massive amount of single store revenue must be attained to attract more franchisees. Upon completion, this project is expected to stabilise and sustainably improve revenue, thereby assisting the business in achieving its long term goal. 3.

The Business Case

The proposed response to an increasing waiting time and error is through the development of a mobile app known as “My Sumo”. The purpose of this business case is to identify the how the proposed project will align with Sumo Salad’s objectives this business case is prepared to reveal the following points: 

Describe the current situation of Sumo Salad and analyse the opportunities this proposed project could bring in order to facilitate decision making.



Illustrate the possible actions that might be relevant to the decision maker.



Justify the feasibility of the proposed project in a business perspective including analysing costs, benefits and risks.



Provide an implementation strategy to outline how the project would be implemented in order to provide a basic plan for decision maker.

 4.

Provide support for post-implemented the project. Situational Assessment and Problem Statement

To facilitate decision making, we have employed three situational assessment

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techniques to provide evidence based support to the decision maker: Porter’s Five Forces Analysis, SWOT analysis, and Gap analysis. 4.1.

Porter’s Five Forces analysis

We utilised the Porter’s Five Forces framework to investigate the general strategic position and profitability of Sumo Salad. We conclude that although competition is fierce in the fast food industry, due to its highly differentiated product specific features, the five forces is expected to provide an upward-drive to long term profitability. 4.1.1.

Threat of new entrants

Sumo Salad stores are mostly located around popular business districts, where it is likely to experience competition from new entrants. Any new fast food store opens will be in direct competition with Sumo Salad. However the current market composition of fast food stores are favourable, as the presence of other salad specific stores are weaker than the average fast food stores. 4.1.2.

Threat of substitute products

The primary product of Sumo Salad is very well differentiated from other fast food stores. The first differentiation is health related. Fast food is usually branded as adversely affect the consumer’s health, but Sumo Salad does it differently than most other competitors in the industry. It is expected that imperfect substitutes may exist or come into existence in the future, but substitution effects still remains immaterial.

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4.1.3.

Bargaining power of customers

Customer bargaining power is manageable for Sumo Salad primarily due to the lack of collective bargaining that may experience from consumers. Since fast food is more or less a necessity of modern life which is deeply rooted in the Australian culture, customer bargaining remain ineffective. 4.1.4.

Bargaining power of suppliers

As with most fast food stores, multiple suppliers are involved in Sumo Salad’s business. As a result, the bargaining power of suppliers is comparably moderate, due to market regulations and antitrust laws that were established to prevent distortion of the market prices and quantity. 4.1.5.

Competitive Rivalry within an industry

Compared to other typical fast food stores, Sumo Salad is able to maintain a high level of competitive advantage through its highly differentiated product, and continuous efforts at innovation. Therefore, Sumo Salad is likely to be able to maintain a competitive edge against its rivalry businesses, and achieve a stable level of profit in the long run. 4.2.

SWOT Analysis

We conclude that the strategic goals of Sumo Salad over the next 5 years is attainable. The following SWOT analysis has been carried out to assist in achieving that goal. This project is intended to address some of these weaknesses while capitalising available opportunities

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4.2.1. 1.

Strength

Successful Franchisee model. Currently there are more than 86 Sumo Salad Stores in Australia which is under Sumo Salad’s franchisee. With this successful model, any new business areas could be supported with a strong cash inflow.

2.

Good internal communication. Weekly, managers from parent store visit most of franchised stores, solidifying the connection between management and front line staff. Any implementation of change is thus relatively smooth.

3.

Online menu and advertisement. Sumo Salad is no stranger to technology; its homepage has been in use for over a decade. Advertisement channels such as YouTube and Facebook have been updated and evolved. With this existing exposure to technology, IT related obstacles can be dealt with little difficulty.

4.2.2. 1.

Weakness

Low staff technical education levels. It is unlikely that front line staff members have technical background. Therefore it is expected to cost Sumo Salad a reasonable amount of resources in staff training and development in order to accommodate the new service delivery model.

2.

Low technology in order system. Unlike other fast food stores, customer’s orders are only displayed on order machine. The order can only been checked by receipt or the staff’s memory. Costs in converting to an automated ordering system, both financial and non-financial, can be significant.

3.

High start-up cost. According to Sumo Salad, franchising a store would cost

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between $350000 to $380000. The barrier of entering is comparatively high as a salad fast food store which might discourage the expansion of the franchise. 4.2.3.

Opportunity

Smart phone Apps is becoming increasingly popular amongst the public. About 13 million people download Apps within half a year in Australia. Large amount of potential customers may bring Sumo Salad a great picture. Competitors such as McDonalds and Domino have already utilised and experienced success with this channel. 4.2.4.

Threat

Sumo Salad not faces potential competition from other fast food franchises, but also from single owner businesses. Growing figure in fast food business continuously bring threat to Sumo Salad. Unlike McDonalds, Sumo Salad is still experiencing its growth period, especially after its acquisition by Tulla Group. In addition, fast food stores with extra channels could potentially bind Sumo Salad in a position of competitive disadvantage. 4.3.

Gap Analysis

Sumo Salad’s potential to perform at a higher level provides an attractive incentive to invest time and resources that may positively benefit it in the long run. Current performance: Being a comparably new fast food store, Sumo Salad holds only a very small portion of the market. The order system is relatively antique and only suitable for smaller

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businesses. Healthy food with high nutrition is increasingly attractive to the public, but customer retention is not completely successful. Potential performance: By utilising information technology to improve current order system, customer retention would be drastically improved and thus taking a grea...