Strategic Management Tasks 2022

Strategic Management
Task 1
1.Calculating the maximum gross revenue for the business of the car wash assuming all
the bays are operating continuously for a 48 hour period:
Total number of bays= 6
Length of the operations period: 48 hours or 4 working days of 8 hours each.
Washing: takes 20 minutes @ $40 per wash
Vacuum cleaning: takes 10 minutes @ $10 per cleaning.
Washing
Working hours per day= 8 which is equivalent to 8x60 =480 minutes
The maximum number of cars to be washed per day= 480 minutes divided by 20 minutes
(480/20) =24 cars washed per day. For the 48 hour period or four days, 24x4= 96 cars
washed
Gross revenue for the washings: 96x$40= $3840
Vacuum cleaning:
Working hours per day= 8 which is equivalent to 8x60 =480 minutes
The maximum number of cars to be washed per day= 480 minutes divided by 10 minutes
(480/10)=48 cars vacuum cleaned per day. For the 48 hour period or four days, 48x4=
192 cars cleaned.
Gross revenue for vacuum cleaning: 192x$10= $1,920
Total gross revenue for the Car Wash: $3,840
$1,920
Total gross revenue, 48 hours $5,760
2. Calculating the maximum gross revenue of the business operating with employee
breaks included and all bays active only 75% of the 48 hour period.
(It is assumed that employee breaks will not affect operations because they go in turns at
different periods)
Maximum gross revenue: 75% x 5,760= $4,320.

Task 2
Calculating the maximum gross revenue for the kebab van in every 98 hour period.
The number of kebabs produced in the 98 hour/5880 minute period: 5880 minutes
divided by 5 multiplied by 6 (5880/5x6) = 7056 kebabs. Assuming that all the kebabs are
sold, the gross revenue is 7056x $10= $70,560.
Calculating the maximum gross revenue for the kebab van in every 98 hour period
inclusive of employee breaks: During the 98 hour period, there are 11-hour breaks. If for
98 hours gross revenue is $ 70,560 what about in 87 hours (98 less 11)? It is
$70,560/98= 720x87= $62,640.
If the business operates at an efficiency of 75% including employee breaks, the gross
profit will be$62,640x75%= $46,980
Competitor’s Business
Calculating the gross revenue of the coffee shop in 48 hours, assuming that it serves 16
people per hour: 48x16=768 x $4.50= $ 3,456.
Cost of production: 768x$.30= 230.40
Net profit= Gross revenue less cost of production= $ 3,456 less 230.40= $3,225.60
Task 3
INTRODUCTION
Entrepreneurs are often challenged between choosing to start a business from scratch and buying
one which is in existence. The following discussion makes a case for or against purchasing the
coffee business based on the gross revenue. It takes into consideration all the factors that might
influence decision making in this matter.
The case examines the pros and cons of buying an existing business and also of starting a fresh
one. It concludes by makes a recommendation as to which is the best choice to make under the
circumstances.

Purchase or Open Your Own
From just a glance the coffee shop business smells very profitable. The rate of return which this
coffee shop enjoys is very high because the production costs are very low. The given data shows
that it costs only 30 cents to produce coffee worth $4.50. Translated to percentage terms the cost
of production is only about 7% of the selling price.
Confronted with two choices of either buying the existing coffee business or starting a similar
one to compete with it, is a decision which is taken after a careful analysis.
Actual business results
The obvious disadvantage of buying an already existing and running a business is the immediate
cost. You must make an upfront payment to purchase it. However, purchasing a running business
is almost a sure bet because risks involved are less than those of starting one from scratch. In
monetary terms, you are looking at actual business results but not dealing with forecasted
estimates. If you have the acumen you might be fortunate to jumpstart an existing but stagnant
business with your expertise to greater heights.
One challenge which needs to be overcome is how to convince the coffee shop owner to sell it to
you. The business is booming and from all appearances, there are hardly any economic or other
plausible reasons to put it up for sale. When a business is being sold tongues wag and people
give unsolicited explanations as to why an owner has decided to sell it. Many people think that
when a business is being sold there is something amiss with it, either it is about to collapse or the
owner is running bankrupt. This is a misconception because reasons why people businesses vary
and are not always negative.
Factors to Consider
Before you decide to buy a business a number of factors must be considered. First of all, is the
location. In the coffee Shop case, this factor is settled because it is strategically placed sitting
close to the car wash. The size is also not such a big factor because with its current capacity the
coffee shop is making good profits. Acquiring the coffee shop will not also change or interfere
with your lifestyle. You are already operating a business which runs at the same time as the
coffee shops.
Buyers of existing businesses do a lot of research prior to making their purchase because they
want to cut out the best deal. With the coffee shop deal, you have almost every detail about it and
you will not spend a minute or even a dollar to research about it. One other thing which a buyer
of a running business does is to carry out due diligence which enables the buyer to know the true

worth of the business and how much of the current owner’s link to the business adds value to it.
You will need the services of experts in valuation to do it for you.
After all of the above is accomplished the next big and very important issue is finance. To buy a
running and profitable business is not a cheap undertaking. You will either use your own money
to purchase it or get a financier.
Opening Your Own
Alternative to buying a running coffee shop business you can choose to establish your own next
to the existing one and compete with it. Starting a new business from scratch is a lengthy
process. There are start-up expenses you will have to meet.
One of the very first questions is about the premises on which you will run the business. Are you
putting up a new structure or are you going to lease an existing one? If you are building a
structure do you have land in the exact place where you want to establish your business?
There are also issues regarding a business name, registration, and licenses. If you will build the
shop will your finances allow you to complete the construction and leave you with an amount to
run your new business?
The coffee shop business looks lucrative but its fortunes might nose dive if you establish yours to
complete with your neighbor’s. When you establish your own coffee shop, the number of coffee
shops will increase by 100% from one to two. The number of customers will not increase
correspondingly. They will remain the same or reduce and you will be left to share the same with
your established competitor. There is also no guarantee that you will succeed to woo all or part
of all your employees who currently patronize the existing coffee shop to move to your new set
up.
CONCLUSION
To purchase the existing coffee shop business has more merit than starting your own. It makes
business sense to purchase the existing business because it already has a name and a loyal
clientele. One of the disadvantages of starting a business to rival your neighbors is the time it
will take to get it on its feet. While you will be in the process of establishing the new business
you will awaken your competitor to fortify himself against your encroaching competition.
Buying the existing business will foster continuity. There will be no reason why you might lose
the existing clientele and the customer base when you take over the business. Starting a new
business will need time and resources to establish loyal patrons and maintain profitability at the
same level.