A business proposal (text form) by students of PGDM 2012-14 of Era Business School, New Delhi

1. SUBMITTED TO:PROF PUSHKAL PANDEY
SUBMITTED BY:Navdeep Dahiya – 005
Col Ajay K Raina, SM - 014
Manoj Kajla - 038

2. Era Business School, 2
Business Proposal Assignment
CONTENTS
Ser
No
Item
Page Nos
1
Executive Summary
3
2
Part 1- Industry
4
3
Part 2 – Market and Competitive Analysis
6
4
Part 3- Market Strategy
7
5
Part 4- Management Plan
9
6
Part 5- Operational Plan
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Operations Management
10-15
EBS, New Delhi

3. Era Business School, 3
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EXECUTIVE SUMMARY
McGypsies India Pvt Ltd, referred to as McG herein, is an offshoot of an
already existing non-profit travel group called Iron Butts Itchy Soles (IBIS). McG is
planning to get into the business of hard-core off-road travel based on motorcycles.
While motorcycle based travel, per se, is nothing absolutely new in India, there are
two facts that form the very basis of this travel company.
The first pointer is the fact that even though country is not new to such a
travel, it is still miles behind developed nations, especially European countries and
Americas. The second issue is the fact that while a few companies have already
ventured into such travel packages, hard-core off-road travel is yet to be handled by
any travel operator in the country.
The business model is based on the unique concept of ‘Participative Travel’
wherein lines between organisers and guests tend to blur. The company plans to
target clients who dare to be different and in more practical terms, have enthusiasm
as well as appetite for such an adventure. Physical fitness and some amount of
driving expertise remain the only essential parameters.
India is a land of festivities and there are many interesting territories, both
charted and uncharted that is waiting to be packaged into some kinds of off-beat
options. The core competency of the company lies in the fact that because of
personal experiences gained by the promoters (all three being bikers) through their
prolonged association with IBIS, they have been able to establish very useful and
good relationships with locals as well as administrative machinery in such areas.
The total investment being looked at is to the tune of 01.10 Crores and
promoters are planning to raise about 40% of the capital through Term Loan. Due to
scarcity and rather lack of reliable data, qualitative method has been used for the
forecasting and some very conservative estimation has been done. As the things
stand today, based on two main prospective plans, the company would be able to
break even by the end of 6th year or 10th year, depending upon the expansion plan
finally adopted. The expansion would happen only after completion of three years of
commercial operations.
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Operations Management
EBS, New Delhi

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PART 1 – INDUSTRY
1.1
Industry Size
The size of Indian travel industry is approximately $US 20 Billion. As per the
long term projections, the industry is expected to grow at the rate of 2.0% to 2.5% of
GDP and, therefore, almost double by the end of Fiscal 2018.
As far as Motorcycle (MC) industry as such is concerned, the size of MC
based travel industry is just about 0.7% of total industry size. There are a few players
like Aboriginal Indian MC Tours, Indian Backpack MC, and 60 KPH, Royal Bike
Riders, Blazing Trails, Extreme Bike Tours, Vintage Rides and such like who have
ventured to capture this industry share. However, the focus of all such players
remains confined to three areas, viz, Ladakh, Goa and Rajasthan. The packaging
options being offered by these players vary from sheer MC renting to a combination
of MC and some/all of the related aspects like accommodation, guidance and
backup cover.
However, the operational methodology of all such companies suffers, to the
varying degrees, from the following drawbacks:(a)
Most of the MCs being used are not company owned. Such an
arrangement fails to inspire confidence in the customers who tend to be wary
of using such machines.
(b)
There is lack of niche-specific approach and most of packages appear
to be results of some last minute fire-fighting.
(c)
Lack of personal touch is an issue since owners of the travel
companies and organisers of such trips are two different entity groups.
(d)
The planning, execution and handling of such trips suffer from lack of a
scientific approach towards the trade.
1.2
Industry Trends
There has been a steady increase in the international footfall in India. At $US
20 Billion, India has been able to garner just about 0.6% of global international travel.
A marked improvement in tourism related infrastructure over past decade and a half
has had a magnetic effect on globe trotters. With the present growth trends, India is
aspiring to receive 01% of global travel traffic in near future.
At the domestic front, the age profile of the country is a big plus. With about
65% of the population below 35, India is one of the youngest nations in the world.
The youth today have higher disposable incomes and they tend to go for things that
are unconventional and different. With media and internet offering virtual access to
almost every nook and corner of this globe, the youngsters are now planning to hit
for areas and cultures that have not been over-exposed by some of the ambitious
journalists and travel reporters.
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With the above trends and in light of the fact that our MC based travel
industry is about 0.7% of total national travel industry, McG is looking at a figure of
approximately $US 14 Million worth of market that is waiting to be elevated. Even
though official figures are generally non-existent, experiences from certain areas, like
Ladakh, do indicate a very bright future for the segment. Just to cite an example, the
total MC based travellers to Ladakh have gone up from 1000 (2008) to 30,000
(2013) and that is a growth rate of 100% (YoY). At a very conservative estimation of
just about 20%, the figures remain attractive.
1.3
Positioning
The company plans to position itself as a unique travel companion who
happens to be one-stop shop for all MC related travel needs, be it company owned
bikes, back up, guidance, permit handling, accommodation and/or food. The
uniqueness, however, lies in two facts – firstly, die-hard off-road experiences
combined with some rare cultural insights; and secondly, the concept of ‘Participative
Travel’ wherein the whole group (irrespective of identities, ie organisers or guests)
behaves like one big family. So, at the end of the day, someone takes on the
responsibilities of fetching water or helping in the kitchen or standing guard while
others pitch their own tents. However, while on the road, guests would be riding light
and all their stuff and camping equipment would be lugged in a truck that would
move closely with the riders.
Beyond tough and uncharted routes, the company plans to offer thematic
travel, eg, Photo-tours to cater for lens persons, Lakes of Ladakh, Camel Safari at
Pushkar, Rural Olympics in Punjab, Elephants of India in Kerala, Majestic Tigers in
UP, MP and Gujarat, Holi chaos at Vrindavan, Sacred Rivers (any one), Hornbill Kick
in Northeast, Haunted spaces at various places, Kite Fiesta and Dandiya of Gujarat,
Ganesh Pooja of Maharashtra and so on.
The company aims to target foreigners, NRIs and HNI segments.
1.4
USP
The USP of the company, therefore, would lie in the following:(a)
(b)
Participative Travel and Big Family Feel.
(c)
High degree of customisation on demand.
(d)
1.5
Company owned fleet.
Knowledge bank and local relationships.
Ambition
There are negligible barriers to the entry for new entrants in the industry. The
company also aims at gaining the ‘first mover’ advantage by addressing a particular
segment. In the given niche, there is no competition as on date. Despite all such
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positives, the company is aiming to gain about 10% of overall MC based travel
business in the country. That translates into a turnover of $US 0.7 Million or Rs 45
Lac per annum.
PART 2 – MARKET & COMPETITIVE ANALYSIS
2.1
Target Segments
As mentioned above, the target segment would be made up of the following:(a)
Foreigner travellers.
(b)
Upper middle class and HNI Indians.
(c)
Age and gender would be no bar but physical fitness and ability to drive
would be the key factors.
(d)
Adventure seeking youngsters who are bored with rut and some very
busy jobs but are informed and are self-challengers.
2.2
Market Size
A total of one Billion people travel all over the world in one year. Such travels
may be localised trips or international outings or repeat ventures but these are
outings of some kind. With India holding on to 0.6% of such a cake (and we would go
conservative and make it 0.5%), McG is looking at approximately 05 Million (Males:
Females = 66:34) international tourists arriving in India. Out of all international
guests, some 30% are below 30 years in age (ie 15 Lac). Even though MC based
travel is 0.7%, we take a conservative figure of 0.5% and translate the meaningful
segment into sheer numbers, ie around 7500 travellers per annum. Even though
bikers could be as aged as 60 years (as long as their health is alright), we are simply
discounting them just to be conservative with our estimates.
Coming to domestic market, 66% of Indians (ie 925 Million) are below 35
years of age. The total tourist figures (of domestic population) is approximately 700
Million per year. Even if we ignore all those who are above 35 (technically a wrong
thing to do but our approach remains conservative), we are looking at some 425
Million domestic travellers who are below 35. Going a step further to be realistic, let’s
assume a figure of 0.5% to segregate those who would like to travel by MC. That
figure is huge (2.1 Million). But the fact remains that out of 100 MC Riders on Indian
roads, 99+ would be found to be travelling without any assistance from a travel
company. So, .05% of such MC based travellers may actually be availing services of
tour operators and that gives us a figure of around 10,000.
When we add both foreign and domestic components, we get a figure of
(7500+10,000=) 17.5K or say 17,000 approx. If this be the size of organised MC
travel industry in our country and if McG aims to grab just 10% (as mentioned earlier)
of this chunk, we are looking at 1500 riders (actually 1700) per annum. Even though
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nitty-gritties of calculations would follow later, just to keep the calculations simple, if
we were to plan a group of 20 riders per trip, we would be able to gather travellers
enough for 75 groups in one year (more about it… a bit later)
2.3
Competitive Analysis.
Looking at MC based travel, the company has some competition from the
existing players. However, if we look at the niche market, there is no competition at
all. The closest competitor, 60 KPH, looks only at Ladakh and that too for 05 months
in a year (they survive through producing and publishing documentaries). Our forte,
in form of local relationships, remains a strength that is unique to us.
PART 3 – MARKETING PLAN/STRATEGY
3.1
Pricing Strategy
As per the going trends, a travel company would generally charge anything
between Rs 4500 to 5000 per head per day for the MC ride. The rough breakdown of
such business calculations would prove that despite such a costing, the average
expenditure per day per MC rider would not exceed Rs 2000/-. In McG’s
calculations, the expenses would be Rs 1800/- per head per day and the breakdown
is as under:(a)
Driving @ 100Kms per day (average) and at 25 KM to a litre, each MC
would consume approximately (75x4=) Rs 300 worth of gas (@ Rs 75/litre).
(b)
Maintenance and depreciation cost would be approximately Rs 2000/per month and with 20 days of actual driving in a month, it would work out to
be Rs 100/- per MC per day.
(c)
Average expenditure for food and tent based accommodation (on
participative basis) would be around Rs 750/- per head per day.
(d)
Service backup costs and taxes would be another Rs 700/- per day.
McG would offer a very competitive price of Rs 3500/- per head per day (all
inclusive except phone calls and liquor). The services being planned to be
offered would include everything that a person needs, starting from a
toothbrush to a bathroom sleeper to towels to medicines and so on.
3.2
Communications
With the background of long association with riding communities, both
domestic and foreign, through IBIS, McG would not be struggling as much as a
fresher would in general. A business tie-up with one of the largest camping
companies of the countries, M/S Banjara Campers India, is on the anvil and the
model would be based on mutual benefit concept. A link would be provided on their
website.
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McG would have its own website and the company would target Page 3
columns of national papers instead of classical advertisements during initial days.
Wide coverage of launch ceremony would be done and the first trip would be offered
to travel reporters on complimentary basis. All our channel partners would place our
links on their sites and brochures on reciprocal basis. Travel fairs and seminars
would be used to showcase our work. At international levels, BBC Magazine (print
advertisements) as also Discovery and TLC channels will be used for
communications.
3.3
Sales & Distribution
The overall model would be a combination of the following modes:(a)
Online.
(b)
Offshore contacts on commission basis.
(c)
Banjara, Yatra, Travelmart, Makemytrip and such companies as
channel partners.
(d)
(e)
3.4
Govt tourism departments.
Corporate Selling.
Service Packaging
Our bouquet of services would include the following:(a)
Travel experience based on MCs.
(b)
Guidance on the road, pre-trip consultations and handling of all travel
formalities like obtaining clearances and permits for entering certain restricted
areas.
(c)
Travel Café instead of a typical office. Here, potential and past
travellers would meet up and discuss travel and routes.
(d)
Camping, community living and participative model.
(e)
Special thematic trips.
(f)
All backup and medical costs.
(g)
Customisation on demand.
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PART 4 – MANAGEMENT PLAN
4.1
Ownership & Raising of Capital
The company would be jointly owned by three partners who would contribute
equally (33.33% each) to raise 60% of the total capital. The balance of 40% would
be funded through the term loan from a bank/financial institute/private funding. It
would only be after the company crosses into huge turnovers running into 05
Crores and beyond that McG would go public but that point is not expected any time
before 2030. At the start point, plans are also afoot to raise a substantial capital in
form of incentive based non-refundable, non-interest paying investments from retail
customers who would be willing to invest today with options to travel anytime over
next three years at a hugely discounted cost. However, such individuals will be
treated as customers only.
4.2
Internal Management Structure
McG would be a ‘lean and thin’ company. Amongst three partners, the broad
canvas of responsibilities would be shared (without any water-tight distinctions) as
under:(a)
Manoj – Sales, marketing and communications.
(b)
AJ – Administration, HR and finance.
(c)
Navdeep – Field operations, on ground liaison and fleet management.
All these fields of work would be handled through a multi-tasking methodology
wherein anyone may have to fill in for others on need basis. For the sake of
continuity, each department will have one or two assistants.
4.3
External Services
All other services and professional touch would be outsourced. Professional
services of chartered accountants, income tax and sales tax consultants, legal
personnel and such like would be hired on need basis. In addition, medical cover
and mechanical backup would be outsourced for the duration of trips only even
though an effort would be made to make long term business relationships with such
personnel. Advisory services of known names and travel reporters would also be
hired when required.
4.5
HR Needs
With lean and thin mantra, the payroll would have the following:(a)
Three partners/promoters.
(b)
Assistants – 03.
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(c)
Ministerial staff and helpers – 03
(d)
(e)
Web Administrator - 01.
Multi-vehicle driver -01.
All other needs would be met through outsourcing. Needless to say that this
model would certainly be expanding as the business grows. As far as cost of HR is
concerned, the following breakup, on monthly basis, would be expected:(a)
Salaries of staff as mentioned above – Rs 1.50 Lac.
(b)
Compensation to three promoters – Rs 40,000 per head.
(c)
PF and insurance costs for employees – Rs 20,000.
(d)
Outsourcing (less hiring of medical and backup services) – Rs 10,000
The total monthly outgo would, therefore, be in the range of 3.0 Lac
irrespective of level of business activities. There would be no training expenses.
PART 5 – OPERATIONAL PLAN
5.1
Location
McG will be based in NCR, in Vasantkunj area, to be specific. The locality is
uptown and goes with our target segment. It is also close to IGI Airport and offers
convenience of operations. As mentioned before, the office would actually be a travel
café that would offer the following facilities:(a)
Self-service coffee machine.
(b)
Free wi-fi.
(c)
Travel library.
(d)
Brochures and leaflets of channel partners.
(e)
Travel memorabilia.
(f)
Indolent seating.
(g)
Conveniences and locker room.
(h)
Work stations for office staff.
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5.2
Inventory and Stocking
No major recurring expenses on inventory, except maintenance, would be
required. The initial investments should be able to see McG through for a few years
without any additional cost requirements. The one time investments would be done
in the following:(a)
20 MCs along with complete riding and safety gear.
(b)
One truck that would be modified to accommodate a small kitchen for
emergency use only as also shelves for stocking camping gear, luggage,
supplies and medical equipment.
(c)
One SUV.
(d)
(e)
5.3
Camping equipment including kitchen.
Climbing ropes, carabineers and safety equipment.
Capital Expense
A total capital outlay of Rs 1.1 Crores would be needed. The justification for
the same is as under:(a)
(b)
MCs and riding gear – 25 Lac,
(c)
Vehicles – 25 Lac.
(d)
Camping equipment – 05 Lac.
(e)
Leasing costs for café – 15 Lac.
(f)
Communications – 05 Lac.
(g)
Website – 10 Lac.
(h)
Miscellaneous (Licenses, clearances and contingencies) – 10 Lac.
(j)
5.4
Travel café set up – 05 Lac.
Working Capital – 10 Lac.
Working Capital Needs
On monthly basis, the following cash outflow would occur:(a)
HR costs (first 24 months) – 3.0 Lac.
(b)
Maintenance of inventory – 10K.
(c)
Café – 20K.
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(d)
Web and communications – 10K.
(e)
Loan Service–50K (Initially, only Interest component)
(f)
Miscellaneous – 10K
Total per Month (approximately) – 4.0 Lac.
5.5
Risk Identification
The following risks are naturally associated with such a business:(a)
Operations being centred around some of the exotic places along the
borders of the nation, do carry risk associated with terrorist activities both
along frontiers and in the hinterland.
(b)
Natural calamities and disruptions due to weather.
(c)
Business lays increased reliance on foreigners who do get affected
whenever any travel advisory is issued by their native countries.
(d)
Areas in Ladakh and Northeast remain prone to Chinese incursions
and related restrictions on travel.
(e)
Ministry of Defence also comes out with restrictions from time to time.
(f)
Locals of remoter areas do welcome outsiders but after a time, as has
been experiences, they do feel as if encroached upon by visitors.
(g)
Road accidents, mishaps and health related issues can crop up any
time.
5.6
Risk Management
The risk would be mitigated through following means:(a)
Indemnity bonds.
(b)
Life and medical insurance.
(c)
Weather and disaster mapping.
(d)
Close liaison with MoD and troops.
(e)
Respect for local traditions and sentiments.
(f)
Employment to natives and meaningful CSR.
(g)
Detailed briefings prior to and during the conduct.
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(h)
5.7
Medical cover during the rides.
Delivery Process
In general, the delivery process would revolve around a seasonal business
that would be hedged through geographical expansion/diversification. Travel areas
have been identified as per weather profiles so as to attain a round the year
business. The business would be based on internet and other modern day tools of
communications and will be free of time-zones. In a true sense, the operations would
be 24x7, especially when trips would be on.
5.8
Layout
As mentioned earlier, the centre of gravity would be a travel café that would
be located in NCR. The perceived general layout of the travel café could be as
shown below:-
5.9
A Typical Calendar Year
With a round the year operational plan, a
something like this:(a)
April- May : Garhwal/Kumaon Region.
(b)
yearly calendar would look
June-August : Ladakh, Lahaul-Spiti.
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(c)
(d)
October: Gujarat.
(e)
Nov-Dec : Deserts, Northeast.
(f)
Jan- Feb : Goa, Kerala.
(g)
5.10
September: Himachal.
March : Break.
A Typical Month in Operations
Any of the 11 operational months would look like this:(a)
(b)
Trip No 1 – 10 days on average.
(c)
Post trip and pre-next trip – 05 Days.
(d)
Trip No 2 – 10 Days.
(e)
5.11
Pre-trip Period (Reception, RV, Briefings) – 02 Days.
Reserve – 03 Days.
Revenue Generation
The broad revenue generation plan would be as under:(a)
Eleven months operations (minimum); 22 trips (75 were the number of
trips totally available on the basis of share in MC travel industry as explained
earlier). So while capacity, as generated initially, is being utilised fully, there
would be a scope of 70% growth ab initio itself.
(b)
Each trip = 15-25 (average 20 persons).
(c)
Per trip expense (for 20 pax)=20x1800x10= 3,60,000 ( based on daily
expenses as worked out earlier).
(d)
Per trip(projected )revenue = 20x3500x10=7,00,000.
Total estimated profit (yr)= 3,40,000x22 = 75,00,000 approx.
5.12
Cash Flows
The Cash inflow in a year, therefore, would be as under:(a)
Outflows @ Rs 4.0 Lac per month = 48 Lac.
(b)
Inflows = Rs 75 Lac.
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(c)
5.13
Projected profits before tax = Rs 27 Lac/year.
Future Ahead
The breakeven point, as per above calculations, would be reached in 5th
(conservative estimate of 6th) year. If expansion of business takes place, the same
may get shifted to sometime in 10th year. It needs to be seen that third year onwards,
MCs would need major works or even change. Also, principal component will have to
be served in addition to the interest component of the loan after end of the second
year.
PGDM 12’14
Operations Management
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