Development of Kindergarten Business
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The investigation of the thesis proposal was set up in order to create a business plan with the help of clear and well-thought decisions based on the professional marketing research. The basic idea was open up a kindergarten with the specialty of focusing on the English teaching from the young ages and providing a children-focused environment where the children have higher chances to become more open-minded, creative, quicker learners and successful members of the society. The inquiry of the thesis was based on hypothesizes and the relationships of those issues among each other.
Small business owners start up a company without doing proper analyses, surveys and making a concrete plan.
Inevitably, they soon find that they are out of money and have no time or clear strategies how to market their business.The business plan is aimed at making preparation for setting up enterprise. It has a high importance that the business owners are well prepared, fully informed about the market environment, have a wide understanding of the industry and know they own firm's goals with the assumption of their strengths, weaknesses, opportunities and threats as well that they are able to have the control of their company's position on the market among the other participants. The main requirement of a business plan is that all used information has to be based on real facts. Foggy and muddy data lead us toward dreaming what does not give any secure base of the idea and no any proper strategy can be formulated and implemented, so instead of the successful operation we can play more a gambling. This cannot be an objective of any serious entrepreneur. There are several makeup for a structure of a plan but every firm has to focus on their specialties and highlight the differences that are unique in their business according to Pinson (2008, p.152). A well prepared, professional leadership philosophy is based on the feasibility of the business idea and provides extraordinary benefits to the company.
The study of the research is based on hypothesizes and their relationships. These propositions constitute the basis for this examine.
The first is about the financial background that families with income significantly above the average are interesting to find ambitious education and high standard circumstances for their children. The Hungarian Central Statistical Office published the average net monthly earnings of employees in the national economy of the year 2010 was 132,623 Ft. (http://portal.ksh.hu/pls/ksh/docs/eng/xstadat/xstadat_infra/e_qli018c.html) In the light of this information it can be assumed that families with one or two children where the parent's monthly net income reaches the 200,000 Ft each want to consume this service. After understanding the benefits of the school this parents based on their wealth possibilities want to use the offered services.
The second states that mothers with higher education what means a bachelor diploma and above are willing to use the most of the services of the SK. These women understand the profit of the diploma and would like to give the youngest members of their family better opportunities, as the children-centered education from the very beginning of their life, what provides those children faster and easier carrying capacities. These abilities what the children can learn in the kindergarten will base the future learning habits and help to reach the knowledge needed to get a diploma much easier as the other children with traditional way of teaching system from their early young ages.
The third hypothesis says that mothers with the knowledge of minimum one foreign language want their offspring to start learning a foreign language already from their early young ages and the starting age should not be later then their three years of age. The importance of this statement based on the fact according to Kovács and Szamarasz (2006, p.106) that children especially in their early young ages are more affiliated in connection of the second language learning and the period until the fourteenth year are the most effective in that field.
As an assumption the basic idea what provided the construction of these hypothesizes was that families with income over the average are ready to separate a budget for taking this service.
The explanation of why the further research objectives were focused on mothers abilities and skills is that they are the members of the families usually who are at home with their children in the younger age and they are searching for nursery schools at the first level. The fathers will be involved only after the first selecting level what is done mostly by the mothers.
Aware of the information of the hypothesizes acceptation or even rejection the best possible business structure, target market, what means the most essential element of this market, can be chosen. Summarizing these specific information of choosing and researching these hypothesizes provides results what mean strong, real facts and serves as a basis of the business plan and implementing the strategies based on them, leads the school to reach a stabile and successful market present in the field of child education. This matter is important in the long-term planning of the company because by increasing the number of kindergartens and creating a possible franchise system in the future can substitute the state nursery schools.
To the examination of these theory issues are several possibilities available what will be listed detailed and discussed in the topic of methodology. The frame structure of the report shows the form of a business plan included the investigation of the speculation with the result of it what provides the statement of the decision making, so that this company can entry the market successfully and reach effective market presence position by its profitable operating in the future. After introducing the kindergarten idea as a whole and the background of the business, a market analyses will be followed by a competition analyses and by a funding strategy. The next part of the exploration focuses on the market research what provides the answers of the above mentioned theorizes. The hypothesis testing gives the results weather the stated theories can be excepted or rejected.
At the end process of the inquiry the consequence of the theory researches offer the construction availability of a successful marketing management with the help of a well-thought marketing strategy.
In the conclusion the experiences will be summarized and judged by the available evidences, furthermore recommendations designated.
In this chapter several method possibilities will be introduced and presented. First of all the development of a business plan will be discussed. The basic line to follow declares the structure of the assessment. In case a company would like to enter the market all relevant issues has to be analyzed and clarified. The business idea in this particular project is about entering the kindergarten market.
2.1. Market analyses
The most important step is to understand the market itself, the field of that market segment with all their advantages and disadvantages. This clear overview leads to be more involved into it and with that precise review the whole transparency is available and then the main direction can be determined. Market analyses gives explanation about the nature of the business. The examination of the historical background, the development of the nursery schools and among them the private kindergarten provides the first base of the assessment. The detailed business issues serve as starting point.
2.2. Competition analyses
After understanding the business in what the kindergarten want to entry, a competition analyses follows. The market can be analyzed by internal and external factors as well. The micro environment is directly linked to the company; the macro environment has a direct impact on the firm's life. There are several methods for the competition analyses what can be chosen for this assessment.
2.2.1. Porter's five forces model
There is the potential method to use as Porter's five forces model (Porter, 1986, p. 541). It is a framework for industry analysis and business strategy development formed by Michael E. Porter and considers the attractiveness of the market in the industry sector. According to him the opportunities and the threats as external factors should take into consideration at formulating the organization's corporate strategy, furthermore by creating the competitive strategy, these issues should provide the basis and the clear understanding of them. He collected and defined the five issues what exist in every market. “As the world economy has been engulfed by strong international competition, Porter argued that strategy equates to how the firm competes against other firms in its business. Porter argued that strategy is not just a series of model at the corporate level of strategy. He noted that strategy includes analyzing potential entrants, suppliers, buyers, substitutes, and competitors” (Stahl, Grigsby, 1997, p. 145)
The five forces what influences the industry in Porter's theory model are the following:
- Existing competitive rivalry between suppliers
- Threat of new market entrants
- Bargaining power of buyers
- Power of suppliers
- Threat of substitute products including technology change
Three of Porter's five forces refer to competition from external sources. The remainder is internal threat. These forces are the parts of the micro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit.
2.2.2. PEST analyses
There is a framework of external factors available called PEST analysis. It covers the abbreviations as Political, Economic, Social, and Technological analysis used for macro-environmental factors. This method identifies the factors which influences most the company from outside. These factors play the major roles in the organization's long-term life and influence the long-term decision making, what the companies has to take into consideration. Recently two extra aspects has changed the sequence of the model's key terms by adding ethics and demographic factors to this strategic tool provided the new terms STEEPLE and STEEPLED. (Curtis, Cobham, 2008, p. 54) STEER analysis considers the regulatory reasons as well.
2.2.3. SWOT analyses
With the help of the SWOT analyses the company's environment can be analyzed by the different directives. According to Ferrel and Hartline (2008, p. 119), creating a correct SWOT offers a mechanism for development of the marketing plan. In case the analysis is not reliable and accurate, the time we have spent on is going to be only a waste.
It shows the viability of a business on the market and introduces the main points of the company what it focuses on the most. It explains the important pillars of the firm and explores the disadvantages, so necessary tasks can be planned and done in the future to eliminate those problems. The SWOT is created for investors and banks as a part of a business plan that every participant has a clear overview about the business and the chances of return. Based on the fact that it shares information what provides perspectives, this analyses means a fusion of information from many areas. That information consists of four elements as strengths, weaknesses, opportunities and threats. The first two characteristics are internal and the lasts external factors of the corporation.
- Strengths: advantageous factors of the business over the other participants of the industry.
- Weaknesses: the firm's disadvantages relative to the other competitors.
- Opportunities: external chances what provide better possibilities in the market field for the company.
- Threats: external issues what can afford difficulties for the business.
During a well-focused SWOT analyses it is essential to look after every kind of competitors to have the benefits of it. The potency of this analysis lies in its simplicity and no trained skills are crucial what earns money for the firm.
As a conclusion of the above mentioned analyses possibilities Porter's five forces model will be utilized in this investigation based on the fact that it provides an extensive overview of the whole industry and a comprehensive solution for analyzing the competition situation on the market with the addition of introducing of identification of the direct, indirect competitors.
The survey was analyzing the market situation, furthermore the system and functioning of the kindergarten business was understood in narrow aspect. It is very important to have a broad overview of the financial possibilities to create a successful participant on the market what represents more efficiency and ensure the organization's competent future by gaining significant profit.
This chapter will observe and look after the potentials started from the local level because the goal is to support and strengthen the school, furthermore to get it well-known, popular among the local clients and investors to lead it into a beneficial market situation. The funding will continue with introducing of state provided support options and at last but not at least with European level of promises.
A financial plan indicates a one year prediction what includes the summary of the costs started with the set-up cost, expenses of the equipments, and the payments of operating as the salaries. The other side of the forecast contains the sum of revenues and direct financial support of the investors, sponsors and the European Commission. All relevant aspects will be discussed in this section and a designated plan will be compiled for the company's finances.
2.4. Market Research
There are several research methods available, but the plan needs to be focused on one or two methods that will yield the results we are seeking.
2.4.1. Quantitative & qualitative data
There are two ways to collect data for market research as quantitative and qualitative as for example deep interviews and questionnaires according to Chisnall. (2001, p.55)
Quantitative data collection is statistical and uses mathematical analysis to measure the research findings. It can inform of significant differences in comparative data, as well as provide more simple analyses such as averages and satisfaction scores. Therefore quantitative data collection requires an adequate sample. It is suitable for deeper problem approach, works with small samples.
Qualitative data collection, on the other hand, is used to identify key issues that a business may want to explore in-depth. Although qualitative methods such as focus group discussions don't actually measure the findings statistically but can be used to uncover issues which can be quantified and then measured through quantitative analysis. Therefore qualitative data collection is often used as a basis to design quantitative research. The qualitative research method provides objective results and represented in big samples.
There are two generic classification of the information on which research designs depend as primary and secondary data.
2.4.2. Primary & secondary data
Primary data have to be collected for the first time by either one or a blend of observation, experimentation, questionnaires.
Secondary data are existing information that may be useful for the purposes of specific surveys. This may be available internally or externally and has a disadvantage of being not fully useful or perfectly characterized to our case. These data can be collected from the government statistics, public libraries or online, offline market research sources.
2.4.3. Primary data collection methods
Observation help to learn the behavior and this can lead for wider understanding of the participants of the market. Ethnography is observing customers using products in their natural environments. Mystery shopping is a form of participant observation. Experimentation is to compare the responses to several alternatives in the marketing mix and to evaluate this information as a guide to management in deciding the most effective method of marketing specific products.
Survey research methods are very flexible and can be used for gathering information about consumer knowledge, attitudes, preferences and opinions.
Methods of enquiry are the following:
- Surveys can be completed via face-to-face questionnaires the personal interviewing, mail and telephone or online.
- Interviews ask and probe respondents to gain detailed responses.
- Focus groups are moderating a discussion with users. Useful for capturing key concerns and messages.
- Product clinics and tests having users try products and give feedback
There are two main types of question according to Chisnall (2001, p. 138): the open-end questions and the closed questions. Open-ended questions result free responses and are mostly used in the early phase of the study, what affects a general overview of the researched subject. It has the disadvantageous that the answers have to be recorded verbatim by the interviewers, so special training needed to handle this type of questions. The closed questions give limited response. It includes the simple alternative (yes/no) and the multi-choice questions, which has the unfavorable characteristic that it always “don't know” answers and it decreases the utility of the questionnaire.
2.4.4. Testing, data collecting, report, budget
After choosing the method will be used for our survey the data collection will follow. The material should be tested in order to be able to create a relevant and reliable market research report in the future. The pilot work is necessary at the questionnaire scheming in order to receive valid results. Repetition is a useful and efficient tool in order to control the accuracy of the earlier responses. The choosing of the most useful method and the testing can reduce the market research costs and this plays an important role in the research budget planning.
2.4.5. Survey result
In this chapter a report will cover the different subjects of the enquiry. Those information mean the base of the hypothesis testing of this appraisal, therefore all relevant data will be introduced and presented.
2.4.6. Findings and analyses
This division concentrates on the effects of the survey outcomes what will be discussed. The above mentioned hypothesizes will be tested and as end results, they will be accepted or rejected. Based on the facts a better and safer marketing strategy can be created and implemented into the marketing management process.
2.4.7. Hypothesis testing
The hypothesizes, what were laid down at the beginning of the inquiry will be analyzed by comparing them with the facts resulted by the market research, and declared to be false or true.
2.5. Marketing Management
The Marketing Management Process consists of analyzing market opportunities, researching and selecting target markets, developing marketing strategies, planning marketing tactics; implementing and controlling the marketing effort. After researching and analyzing the market environment, the strategic management part of the marketing management process will follow. The STP marketing will be used for further analyses with the support of the 8 P's marketing mix technique what is mostly applied for non-profit organizations.
2.5.1. Marketing Strategy
The STP marketing is an important element in developing the marketing strategy and refers to the market segmentation strategy (Segmentation), target market selection (Targeting) and market positioning (Positioning).
The main goal of this strategy is defining the facts that on which market the business should operate and what kind of technical solutions should be implemented. Segmentation divides and separates the market into distinctive groups with a focus on those likely to deliver the best return. In his review Dr. Fojtik said (2011) “Targeting is the process of evaluating segments and focusing marketing efforts on a country, region or group of prospects and customers that has significant potential to respond. It highlights the sector that can be reached most effectively, efficiently and profitably.” Positioning helps to become part of the customer's mind by placing the company and the created brand efficient.
2.5.2. The 8P-s marketing mix technique
The basic concept of the science of marketing is the 4P-s, or at some places 5 to 9P-s in a wider approach. According to Donovan and Henley (2010, p. 282) this method is very useful. “Perhaps one of the best known concepts in marketing is the '4Ps', apparently first described by McCarthy (1960). The 4Ps have endured because they provide the four fundamentals of marketing planning and management.” This is widely known as the marketing mix and even though it is relatively an old concept compared to all the modern marketing tools, it is still a very useful, easily applicable and therefore a popular way to market one's business. The name of the concept comes from the starting letter of its core components. The short form of the first one is Product, which is followed by Price, the next one is Place and the last one is Promotion in the basic part of the method. According to Crossley (2010) People relations, Partnerships, Policy changes and Paid marketing form the additional 4 social elements of the 8P-s. This scheme was constructed basically for non-profit organizations but due to the reason the kindergarten is looking for investors, sponsors as a non-profit organization, this procedure can be applied into it.
2.6. Conclusion and recommendation
At the end of the investigation a summary will follow with conclusion, recommendations but no new methods will be introduced in that section but judgment of the evidence will be presented.
3. Market analyses
As the first step the most important is to analyze the market. After understanding and having a wide overview of the business, the main direction can be determined.
3.1. The historical background
The historical background of the development the nursery schools will be inquired. The first kindergarten started in 1828 in Hungary by Teréz Brunszvik according to Mészáros (1968, p. 248). Big number of children visited this institution and mostly the offspring of families in poor financial and social environments. The first reason to collect them was to teach them the rules of etiquette manners, moral and social values besides the general knowledge as mathematic, reading with the help of object lesson tools. The music and singing played a huge role because children can learn easier playfully and to develop the habit of body maintenance is the best way to choose the versification combined with singing. Those schools were operated and financed by members of wealthy, reach families who felt social responsibilities. The kindergarten system was part and the first cornerstone of the public education structure. They operations were regulated by the public education act. To be able to place the kindergarten business on the market it is a central question how big is the market. This business is not well covered and because of the rising demand of interest about the new age nursery schools there are a lot of possibilities to create a structure even to establish a franchise system in the future based on the rising stage of dynamism.
3.2. Legal environment
1993rd Act LXXIX. law regulates the public education in Hungary. “The act extends to the regulation of pre-primary education, school education and teaching, the college of education and learning, as well as on the related administrative and service activities, regardless of the structure and maintenance of the institution.”
It declares all aspects of the procedure and operation detailed. Every child has to attend the kindergarten at least one year long before the primary school age and after they 3rd age, but have the opportunity to enjoy the service the entire time during this period. The operation of the state schools is financed by the government but the in practice the parents has to add direct or indirect support on a monthly level if they would like to secure the acceptable environment for their children.
3.3. What is the kindergarten business?
To be able to place the kindergarten business on the market it is a central question how big is the market. There are 44 kindergartens existing and operating in Pécs included all private nursery schools according to the Pécs city official portal. (http://hivatal.pecs.hu/oktatas/ovodak/) According to the regulation from 20 to 25 children can create a school group what means that the kindergarten have to operate closed to those number of occupancy what is a great disadvantage of the state nursery schools against the private schools and it leads the company into a better market situation because it wants to operate with less number of children. This new age nursery school business is not well covered and because of the rising demand of interest about them there are a lot of possibilities to create a successful business and even to establish a franchise system in the future, based on the rising stage of dynamism. The other main issue of the industry is that following the basic educational plan and habit, the institutions operating language is Hungarian and the level of foreign language teaching is very low and not focused. The importance of that topic will be explained in the subchapter of 3.4.2.
3.4. Sunshine Kindergarten
The presentation the main structure of the nursery school provides a base in understanding the concept as a whole of the Sunshine Kindergarten (SK).
The business idea this institution places of interest on foreign language and the importance of nature in the everyday life. The education system teaches the children every subject theoretical and does not pay attention of the well and easy practicability of the topic. In case learning would be part of our life from the early childhood, every issue could be cultivated easily and naturally as how to clean our teeth. The globalization plays a big role today and the world became very small. The education will be available in English and Hungarian languages. The well known English give an advantage for a better and easier prevailing around the Globe. The kindergarten will operate with small and closed group of children with max.15 people in one group educating by intellectual way (no TV) what focuses on environment and nature. The global warming and nature catastrophes warn us to change our life style and show children how important the natural world is and we need to take care of it. On the daily basis it will be two teachers permanently and the subsidiary personal on duty.
3.4.1. Vision & Mission Statement
The vision statement is that children are our future and they can really save the world. It is constructive to provide them the possibility for experiencing the basic steps of a healthy physical-psychical life what has more understanding on the importance that we are part of the nature and we have to learn how to live in symbiosis with it to achieve a happy and successful adulthood. The second part of the vision is that useful and efficient English language knowledge is feasible for everyone by implementing a correct tools and training ways.
The vision can be realized by educate young children by a different way creating a strong basis to be open-minded, to live in symbiosis with the environment and be flexible. At this peer group do not exist yet developed habits, so it seems the easiest way to put into action this knowledge into people's life without changing any personalities of them. With skilled kindergarten teachers and a well defined schooling program the vision is successful reachable.
The main service offered from the SK is the child supervision and training by a different way as usual in the state nursery schools. The quality of the service is always lower there due to the less environmental conditions as old buildings and high number of children put into one group. It is understandable that overloaded nursery schools are not able with every willing of the teachers to concentrate very well to every child personally. Every state institution needs financial support from the parents anyway due to the bad circumstances, so families in better financial situation can offer their children higher quality education from the very beginning. What else makes different this institution is the relationship to the nature and to the English language.
Nowadays the environmental pollution plays a big role in our life. In case the inhabitants of the world do not change their mind considered pollution we all know the possible causes of this behavior. The basic idea is to school and show people already in their early childhood the importance of that fact. The best way to protect the environment is to create nature focused behavior to give the chance for adults to create more environmental friendly businesses in the future and think different simply. All offered food is ecological and organic, so all meals in the kindergarten should be prepared from fresh ingredients ordered from the organic food company. The physical training will be a part of the daily routine to get the children used to it.
The second issue what need to be taken into consideration was the globalization. Due to this fact distances disappear and cultures come more close to each other. The basic problem is the communication what can be solved by knowing the most useful language what is the English based on the research of George Weber.
“English is the most obvious example of a language on the way up. It has survived the fall of the British Empire without even slowing down, it has now gone beyond being the language of the world's only remaining superpower (which in the long run would be a liability), becoming the first truly world-wide lingua franca. International English has become independent of any one English-speaking country, even the USA. From, a certain level upwards, in business, sport, politics, science and many other fields, knowledge of English has become not a matter of prestige but of necessity. Also: the level at which this occurs is moving ever downwards. In science and technology the grip of English is complete. With growing computer sophistication it is becoming easier to put even the most awkward languages and script on screen but that does not alter the big picture. The Chinese trader, scientist, manufacturer who wants to talk to his foreign contacts is not helped much by even the most carefully presented Chinese characters on his screen. He has to tell his non-Chinese customers - in English.” (http://www.andaman.org/BOOK/reprints/weber/rep-weber.htm)
The figure shows the significant difference of the most used and important languages.
At this point we have to mention the weakness of the Hungarian school system. Subject and languages as well will be taught as an external data without any successful integration that knowledge into the student's every day. Our belief is to teach a second language by a natural way from the early years can provide a big advantage by implementing that knowledge effectively in the practice in the everyday life. At this age group our expectations should not be high, the passive language skills will be developed and so a stabile basic for the future improvements.
The business idea is based on the above mentioned factors and the rising demand for the child focused nursery schools what this institution can provide with special attention.
3.4.3. Management and Employees
This institution operates catalyst board with the leadership of the executive director who takes the responsibility of the correct, up-to-date professional background, of the creating and operating teaching program. The financial manager coordinates the legal financial background of the company, the book-keeping and at last but not at least is responsible for the legal functioning of the business.
The employees utilize all KSAO's as the professional and educated knowledge in the field of pedagogy, business administration, legal regulations and communication for operating the kindergarten. Among these managers a horizontal integration is observable.
Three employees are working in the daily process. Both teachers have to have excellent education and English knowledge. The expectations toward them are to be motivated, well skilled, experienced in other institutions, open-minded, flexible, love children and be able to handle them very professional and speak fluently Hungarian and English as well.
The third employee is responsible for the preparation of high quality meals. She is a very open-minded, well experienced cook following the healthiest cooking styles. She acquired the nanny degree and strongly dedicated to children. This combination can be well utilized in the SK.
Between the employees exists also a horizontal integration. There is clear vertical integration between the managerial level and the employees but all ideas are more than welcome and will be considered too.
The most important concern is that except the nanny everyone has a high quality of English knowledge what allows the continuous English language using. All of the members agree strongly the vision & mission statement of the company and so will work for the same goals with high motivation.
4. Competition analyses
After understanding the market all this information leads us to the next analyses process to measure the industry in the field of competition. Porter's five forces method analyses the attractiveness of an industry. It represents the threat of new entrants, the substitutes on the market, the bargaining power of the suppliers and customers; and the effect of them on the competitive rivalry within an industry as the Figure 2 symbolizes.
The threat of new entrants are high due to the fact that there is a high demand of environmental-, and language-focused education in the nursery school sector. At the other hand the companies has to operate at least one year based on the nature of kindergartens, so the decision to enter the business or not needs more responsibility level as a participant of the traditional trading industry. The advantages as operating with lower number of groups and focusing intensive on the English language require higher quality of skill and knowledge. In the state nursery schools the creativity and suitability of the teachers are not as important due to the lack of enough time spending on every single child. The fulfillment of these needs points the level of the quality what can reduce the want of entering this industry. In the case of small companies the new entry barrier plays a big role. The legal background is equally applicable to every participant in the education system, so this issue doesn't influence the market so much. Every segment of the market which is dealing with people has to fulfill the strict health and administrative regulations, and follow the authoritarian policies as well.
The second factor of the analysis deals with the substitutions on the market. It is important to separate at this point the direct and indirect competition. Only few direct substitutes exist on the market but plenty of indirect actors. Huge amount of indirect rivals presents in the build of the state kindergarten but still without weight because of the size, environmental conditions and educational quality of them. The innovative tries have to take into consideration as well, because those schools offer now English lessons too but due to the high group numbers the teachers don't have the possibilities to focus on the children individually even if they skills and qualification are available.
As real substitutes can be mentioned the private kindergartens and in this region only one called Kiddi-Care provides same kind of services. (http://www.kiddi-care.net/engindex.html) This can be also used as advantage because it brings an example and every one can learn from their operation a lot, information can be collected due to the benchmarking process. There are still great amount of potential customers available on the target market because this competitor can extend the number of children only until 20 people. Pécs is a big city enough to start a successful kindergarten business with special V.I.P. treatment for children.
The supplier's power depends on the quality and reliability of the service. Unique suppliers play huge role on the market, if they are well-known. The industry itself is very various and can be separated by the offered services as well. The strategies of the schools also can differentiate from the competitors. Smaller and private ones market services on higher level and in specialized categories, only the type of offered services, the quality of them and the price can be a competition issue. Based on the fact that this services cannot be gathered by families with average income, these institutions wouldn't have a great influence but because the number of targeted is very low, the chance increases for the success. On the other hand there is a very few possibilities for this target group, so the influence of these private kindergartens increases.
This aspect highlights the methodology of the BCG Matrix (Boston Consulting Group, 1970), that the starter company cannot work at the beginning with outstanding yield because it can be found in the question mark phase and the prices should to be adjusted according to this. In the position of star the relative market share rises until the market still growing. The next phase called cash cow where no market growth is observable but the market share is the highest, so, here is possible to gain the most profit. After declining the market share too, the kindergarten needs to take into consideration of changes.
The consumer's bargaining power has a low level of influence on the private kindergarten business due to the lack of high number of suppliers what is the case now. The buyers also can decrease the prices of the services in that field, but in this special situation the parents have to buy the service without strong influences on it. In case the value and the price are not in harmony or the service is overvalued, or in case the market is overloaded by the similar products, as in the case of the state institutions, this buying power will adjust the market situation and control the prices until the supply do not change.
The competitive rivalry is not intensive in the private kindergarten sector but observing the entire industry there are high number of state companies.
The way how firms satisfy the customer needs and offer special services plays a huge role in that business. Preciseness, accuracy and reliability are the driving force of a company. Whenever a consumer pleased there is a great chance to reach good reputation at the local level.
The using of excellent quality toys and equipment increases the worth of the service as well as the quality of the institution and the related brand. The indirect competitors are state nursery schools what are cheaper but their service level is much lower than from the new age kindergartens.
The eliminating of competition as creating partnerships has great potentials and can be utilized better than the entering the competition.
— Cooperation with other private kindergartens and not competing
— Merging the new entrants what provides the possibility of company growth
— Creating clear customer's overview about the company and its services build trust what leads to the brand loyalty in the future
Good relationship with competitors in this field so even any cooperation is not excluded in the future. Based on the fact all nursery schools cannot have the profit maximization as only goal in their life but the professional education of children as well. In this case benchmarking gives a possible solution widening the knowledge, eliminating and avoiding the problems in the field of teaching but with cooperation the experts have the chance to create a corporate and well functioned system depended not only on theoretical principals but on tested and proven practical elements as well.
The alternative solution can be making a joint venture with the “Kiddi-Care” Kindergarten. The main principles of the Sunshine Kindergarten with its vision and mission statement have to remain until its existence.
It is important to mention that the basic consumers do not have a clear overview about the market and the need of high quality education will not appear. The marketing plays a big role nowadays. Due to the lack of effective using of it, the information doesn't reach the clients by the distribution channels, so professionalism is inevitable and required.
The starting point of the financial aspect of the Sunshine Kindergarten is the form of the company. A limited liability company is recommended for the operation and maintenance of the kindergarten. Although it is a profit oriented organization, a secondary funding opportunity will be introduced, the fundraising. In the further investigation this basic line will be followed and focused on in every aspect of the corporation's life based on the fact that the innovation level in the eco and English focused education is very high and these kinds of projects has high power of integration on EU level.
The following existing tangible and intangibles assets are presented as foundation sources. There is a 150 m2 house with 45 m2 garden in the boarder of city center in Pécs available. The renting fees are eliminated due to the fact that the business owner inherited the tangible asset, but the house makeover costs will be included in the expenses of the SK. This expenditure should be covered by the EU Commission offered tender application support and other sponsors. Special Programs provide several grant possibilities in the European Union for small and medium-sized enterprises (SME's) according to EU Commission, in the document of Call for proposals of 5/G/ENT/CIP/11/E/N02S003 as part of the Grant Programme 2011 (p. 5) as
— CIP-Competitiveness and Innovation Framework Program
— EIP-Entrepreneurship and Innovation Program
Both programs were established from 2007 to 2013. As this business idea is innovative and focuses on education what increases the integration level of children and youth in the future. It has to be noticed that applications have to be handled in half a year before the demanded finance realization.
The idea of the eco nursery school combined with the English base teaching style constitutes the intangibles, which are belonging to the group of intellectual assets. “Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. IP is divided into two categories: Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works.” (WIPO-http://www.wipo.int/about-ip/en/)
Fundraising alternatives will be searched for during the SK's operation. There are several organizations in Pécs and Hungary which are important commissions of promoting environmental and English language focused education especially from the young ages of the children. The goal is to find all organizations; governmental, educational, fund institutions and individuals who are:
— Involved in charity activities in the field of new age education
— Open-minded to cooperate and/or barter
— Social responsible and interested in sponsor- and partnerships
The basic task of the organization is creating a well-functioning and fruitful relationship with the sponsors in local, state and EU level.
5.1. Financial Plan
A financial plan indicates a one year prediction what includes the summary of the costs and incomes and results a projected outcome.
The summary of start up and operating costs gives the basic information about the company's expenses. Set-up costs need to be determined and also covered. These costs are the accountant's fees, the solicitor's fees, the costs of business registration, insurance premiums, licenses and workers compensation. There are many offers on the market in connection with the service fees but some costs are specified by the Hungarian government as the equity capital what is 500,000. - HUF and obligatory to deposit on the bank account. There is no license fee due to the fact this business environment is based on its own intellectual property. The salary and the associated costs need to be covered as well. As the place where the kindergarten operates is the property of the organization so no leasing or rental fee should be paid but the maintenance costs and normal fees such as gas, electricity, water, insurance expenses appear in the everyday life. Other equipment costs are listed that are arisen because of the kids. Food, as the kitchen operates with organic foods just to make sure that the kids are going to be as healthy as they can be, this has a bit more financial requirements than the normal foods, but can be solved from the tuition fee. As I above mentioned the tuition fee contains not only the food, the aerobic, kid yoga, swimming and outside excursions trips as well from this money. Of course this is not a permanent amount it can vary trough the year. Starting operations include the cost of advertising and promotion, the raw materials and supplies; and the working capital expenses.
Equity investment is defined in 500,000.- Ft start-up capital. The firm's target is the EU tender application, so a part of the capital can be supported by the CIP program with 5.000,000.- HUF based on the prediction. Several organizations will be asked for financial support as the Pécs City Mayor Office, Ministry of National Sources and other companies from the services sector who are interested in this project. Indirect supports will be targeted from companies as toy shops for instance, who can offer eco toys or organic food suppliers, who can offer raw materials. From institutions as the British Embassy or language schools the support can arrive in a form of books. All together the goal is to collect support of 500,000.- HUF.
The other side of the forecast calculates the sum of revenues, the financial support of the investors, sponsors and the European Commission. The financial forecast of the kindergarten explains about the income side as well. There are money resources as the tuition fee, the per capita norm, the donations from the parents, the support of state institutions and investors, sponsors, furthermore the financial EU granted support. The tuition fee is a fixed amount every month for every child the parents have to pay. The prediction calculates with 15 children in average with 11 months active operation time. The norm per capita for kindergartens is a fixed amount of money as well; the government to every nursery school, primary school and secondary school gives this per capita. This is why the state nurseries are so over used because they have to live from something and due to the lack of other income relevant possibilities; they register as much children they can. This is the part of the governmental subsidy (the resource of these subsidies is the central budget), the main ingredients of it is the norm subsidy system what was mentioned above. The other is the centralized estimate; it is for financing some professional issues and the target subsidies, these are for developing and only available through tenders.
The further source of money is coming from the donations and fundraising. The goal is to find all organizations; governmental, educational, fund institutions and individuals who want to invest into social responsible activities in the field of education, specialized on new age kindergarten. These are the nursery school's incomes what the institution can use for its operating and expanding actions in the future.
The Figure 3 interprets the participated elements of the business start and results a surplus of 800,000. - Ft what can be used for the operation of the kindergarten and the application costs for tenders in the first financial year.
Setting up costs (fees, rents)
Plant and equipment
Grants to be Received
Due to the nature of the industry, nursery schools cannot start any time they want; rather it is not advisable for them. Kindergartens open the doors for children on the 1st of September and operate during the whole year with one month summer holiday.
The figure 4 focuses on the profit and loss forecast of the Sunshine Kindergarten for the first financial year. The successes of tender applications are predicted and inevitable in the long-run of the firm's life cycle. The fundraising activities will be searched during the entire time.
(Projected for period 01.08.2012-31.07.2013, in 1000. - Ft)
Grants to be Received
Per capita (tuition fee and norm)
5.2. Goals and expectations
The goal of the organization can be determined as different on timeline. The short-term goal is to establish the firm, find the optimum structure of it, build the contacts to parents and find more and more investors among the individuals and also at the corporate level. The closed cooperation with the kindergarten associations is highly required.
The firm's long-term expectation is the consolidation of its market presence in Pécs and the expansion of its education system on national level. This act leads the firm into a safe and secure position in the field of nursery school industry what ensures a stabile market share in the future and fulfills the vision and mission requirements of the business. As one of the important component of the scientific part the educational factor needs to be elaborated. The organizational idea is to familiarize the children with the English language and the environmental friendly behavior in their early ages, so by a natural way the environment saving life style will be formed and developed among the younger generations independently of the family's interest or even uninteresting in this field.
The payback time is determined to the long-run division and it will strongly depend on the efficiency of the short-run activities. The minimum operating time was estimated as one financial year in the life cycle of the organization. After the half-time period analyses need to be done to assess the firm's current market situation to decide about the future way and course of the business. In the case of expansion special loans are available on the market. The EU Commission offers microcredit for SME's.
The further goal was to create a brand in educational system what will be available not only for the wealthy families but also for the average as well in order to reach the high level of EU integration among those children and to reach this expectations further EU tender will be addressed. The future structure of the organization will be based on the success of it and it will decided then if the kindergarten can offer its services for lower tuition fee or the strategy should remain the same as in the beginning and the extension of the nursery school system will be not placed.
As possibility for the future plans loans play a huge role. The supply of microcredit (loans of up to €25 000) is important for encouraging new businesses fields, stimulating economic growth and opening doors to people who would not otherwise have such. Traditionally, the term microcredit is most commonly used in relation to developing countries, where it involves much smaller amounts and is focused on eradicating poverty. Entrepreneurs often find it difficult to borrow small amounts, because many banks see microcredit as a high-risk, low-return activity, and their handling costs are high in relation to the lent amount. Many EU Member States have specialized microfinance institutions to overcome these problems. The New Széchenyi Plan provides tender possibility supports for the companies for growing with the help of the European Union. (http://ujszechenyiterv.gov)
6. Marketing Research
segmentation Consumer, business and geographical dimensions
In this chapter the review of hypothesizes was the basic concept to follow. To
The target group of the kindergarten should be identified what will be a part of the investigation.
Main objectives of the survey: hypothesizes.
— services: Original way of kindergarten or new age services?
payments? are you ready to pay?
The research focuses on the predicted objectives.
— Which segment group is the right decision.
— wher do they work? center of Pécs..
— donations? extra support?
6.1. Survey Results
6.2. Findings and Analysis
Hypothesis testing: rejected, accepted.
7. Marketing Management
The task of this chapter is to discuss the marketing management plan and the strategy.
7.1. STP Marketing
The STP marketing is an important element in developing the marketing strategy. The main goal of this strategy is defining the facts that on which market the business should operate and what kind of technical solutions should be implemented. Segmentation was discussed in the previous chapter because it was the objective of the marketing research.
Based on the results of the inquiry and due to the fact the hypotheses were accepted the target group can be identified more precisely.
As this company is not a state kindergarten, this means that it operates besides the less state funds from the amount of money that the parents pay after their children what contains everything as nursery fees, food, swimming, aerobic and other operating expenses. In comparison with the Hungarian salaries, the target group is the higher managerial level parents and families with successful own businesses with a higher level of income than the average to be able to pay the monthly fee amount. The other segmentation group of high educated mothers seems to be a good decision to focus on and especially on mothers with one foreign language knowledge at least in the consumer dimension.
In the business segmentation the companies will be targeted first of all who can support the kindergarten directly or indirectly. With the help of cause-related marketing tools, those firms can offer advertising possibilities, equipments, and discounts from their prices. The institutions involved in environment saving and in language teaching, or focusing on the benefits of the English language as consulates or ministries, are also chosen to gain partnerships and sponsorships.
The geographical dimension offers very low level of options in the short-run of the firm, because the service providing place is bounded. As advantage it has to be mentioned that due to the centralized position of the building the parents can reach it easy. Most of the interviewer's working place can be found in the city centre.
The positioning is the next step in the strategy formulating process. The SK brand will be developed in the mind of the target people in order to differentiate it from every existent and not existent competitor on the market. The combination of environmental conscious and English focused service is the basic conception what is wanted among the open-minded parents. To burn this information in the mind of consumers makes the SK competitive.
7.2. 8P Marketing mix technique
Basic concept was the 4P Marketing mix which first element is the Product (Donovan, Henley 2010). The presented special intangibles are unlike conventional kindergarten services. These traits are the basis for their decisions of consuming or not consuming. Broadly speaking, these intangibles characterize the perfect combination, which has major effect on consumer decisions and therefore can be used to influence them effectively. Furthermore, the used equipments have to be eye-catching and in line with the offered experience in order to avoid confusion and possible disappointment.
Place refers to the location where the kindergarten operates. Because of the given building and its advantages geographical position this aspect shouldn't have discussed longer. As long-term goal new kindergartens can be started in the high demanded regions of Hungary based on the research and analyze of the places.
Price is one of the most crucial factors that affect the decision of consumers. Especially in today's tough economy, people consider their budget more carefully than ever before. On another hand due to the monopolistic situation of SK the expensive prices of the services does not divert the consumers. Since competition on the market cannot be ignored, it is important to analyze the prices of other services providers on the market with similar qualities. In the case of higher prices, the school would risk losing some customers because of their budget, while significantly lower prices might make the service appear inferior. Another group of factors to be considered while making pricing decisions is the cost of external costs. Even though these ones cannot be controlled by the company, they will still affect consumer decisions and therefore cannot be ignored. There should not be too much difference between the prices of similar private nursery schools which is the case because the prices of Kiddi Care are almost the same as of the SK.
There are many Promotional tools that can be used by marketers in the case of kindergarten business. Such tools include public service announcements (PSA), press releases, direct marketing methods, HTML methods and advertising. They all serve the basic purpose of introducing the firm, making consumers more familiar with them and attracting new buyers. The cheapest among the above mentioned methods is the HTML marketing, where promoting happens through emails or websites. Even though the costs are relatively low, it can require a lot of work to obtain email lists or to make a homepage well known and frequently visited. On the other hand, the most expensive of the above mentioned methods is probably the classic advertisement - through television or radio commercials, but their effectiveness is also incomparable. Finding special promotion possibilities trough the sponsorship is part of our goals.
The first component of the additional 4Ps of the social marketing mix (Crossley 2010) is made up of the People relations. Basically, there are three groups of people to be considered that provide valuable marketing assistance to SK.
— The first group is that of the people in direct contact with the school, they are the core participants. This can be the teachers and the manager whose income is very much defined by the success of the project.
— The second group is the ones a bit more distantly related to the project, but who can still provide assistance, e.g. by promoting the item and influencing others.
— Finally, the third group of people consists of those who can be characterized by providing financial assistance, e.g. donors or sponsors who donate funds either in hope of higher return in the future (or other financial incentives) or because of personal interest.
The next P stands for Partnerships. Even though today this concept is gaining more and more importance, it is not yet included in the traditional 4Ps, which is usually applied for profit oriented businesses. For those operating in connection with SK, it is even more important to have alliances, cooperation that could be helpful achieving goals and awareness. The implementing the cause-marketing is part of the partnerships. Special events can be organized regularly by the SK involving partnerships in order to gain donations and fame.
The third P in this group comes from Policy changes. Even though no business operates in a law-free environment, regardless of their for-profit or non-profit status, those in connection with children education are especially prone to policy changes. Small modification can mean big changes for the SK, since it operates on a strict governmental regulation bases. For this reason, it is essential to push towards favorable policy changes, through lobbying if it is necessary.
The last P in the social marketing mix is there because of Paid marketing, which is in a bit of a contrast with the previous three ones. Despite the fact that there are creative and cost-effective ways of marketing the services of SK, as it was described in the previous few paragraphs, sometimes raising funds is inevitable to gain awareness and publicity but the goal is to win sponsors in that field as well. Based on the fact that the SK has limited space, huge advertising program is not needed to use as a marketing tool. The costs of advertising campaigns should be decreased as possible by involving the possible sponsorships. As the nursery school is relatively small, we can trust on the mouth-by-mouth advertisement, as the parents who are satisfied with the services, are going to suggest the SK to others.
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