Business proposal

BUSINESS PROPOSAL:

THE ECONOMIC ANALYSIS OF EVENT PLANNING BUSINESS

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The economic analysis section

The following section of the business proposal analyses the different economic aspects regarding activities that will be involved in event planning. Therefore, this section aims at achieving a meaningful approach to deal with prevailing as well as unexpected economic conditions in the business’ life. Additionally, this analysis aims at creating responsive brands that can perform profitably even under changing circumstances. This therefore takes shape through evaluating different costs associated with the different line of products, elasticity’s of supply and demand as well as the means and approaches to increase the barriers to entry in order to maintain a competitive edge in the market.

Activities to be carried on with under event business planning;

Under the event planning business therefore the following activities will be carried which are explained in detail as follows;

Catering;

Catering services will involve both the on-premise catering and the off-premise catering. On-premise catering will involve the provision of food preparation and serving services while the off-premise catering will involve the provision of precooked food to a remote place where the event will be held.

Décor

This is a service that will be offered to customers involving the decoration of performance stages, houses, indoors for party activities and furnishings products for houses or rooms as the customer would prefer.

Event planning at personal and professional level

This service will involve the arrangement for and the outsourcing of personnel such as disk jockeys, florists, entertainers such as acrobats, magicians, musicians and others as well as coordinating logistic activities for the delivery of important supplies among offering networking, legal assistance and marketing as well.

Analysis of the market of each of the products to offer;

Market structure

An analysis on the market structure reveals that there are many and competitive businesses offering event planning and catering in the market. The high level of competition has therefore given rise to a lot of product differentiation thereby necessitating the business to create more unique and quality service to the customer. However, the number of consumers who seek catering services is relatively large compared to other markets thereby offering an opportunity to explore the market. Additionally, the condition of entry is fair with little difficulties involved in convincing consumers that one can offer quality service like the ones who are already in the business. Entry is easy as there are no obligations attached to one carrying event planning business other than tax and other few legal compliance requirements such as social responsibility and environmental conservation.

However, for décor, the market structure is a monopoly with a single major player who has the power to determine the market prices for the service. This therefore makes the condition of entry very hard. But with the low level of differentiation of décor products by the monopoly firm, there lays a gap to venture in the industry through providing a diverse range of décor to suit different tastes and preferences as well as a competitive price as well.

Product elasticity of demand and elasticity of supply

Catering, décor and event planning are highly elastic in supply as evidenced during the festive seasons since the players are many and relatively lesser capital is required to offer the service and that customers will always give the business some deposit cash to facilitate the activities with the final payment upon completion of the agreement. The elasticity of demand is however inelastic to increase in prices.

Pricing policies and the rationale behind the chosen price values

Over time, it has been observed that the more a catering or event planning business charges clients the more it is likely to attract more customers as stated above regarding the inelastic demand. This is for the reason that the customer base in this context values price with the quality offered accordingly. This therefore offers very positive prospects in the business’ pricing policy with an aim of profit maximization.

However, for décor which is a monopoly market, pricing the service fairly will lead to an easier entry condition and increase business performance since consumers have always lacked a fairly priced décor services owing to the large prices charged by the monopolist.

Effect of pricing decisions on, marginal values

Increase in the quantity of service supplied is expected to reduce marginal costs as there will be gains from economies of scale as well as gains associated with fixed costs that are expected to remain fixed even under the highest possible size of the service that will be offered. Marginal revenue however is expected to decrease beyond a certain amount of the quantity of service supplied. This is due to the provision of discounts to customers for purchasing larger orders in order to increase the total revenue of the business.

Non pricing strategies to integrate within the product line to increase the barriers to entry

The major non-pricing strategy to integrate in the business is product differentiation. The business will offer an array of foreign cuisines that apparently the prevailing market has not been able to offer the market. This will involve the hiring of the most proficient chefs in the industry to provide a unique package in catering of which the business has done a pre-feasibility study and established that the market will become accustomed and obsessed with foreign cookery within a short period of time.

The following strategies will also be used;

Advertising

A rigorous advertising of the business products to prospective customers is expected to improve the business image and contribute towards creating a sustainable brand in the market.

Economies of scale

The business aims at building capacity in all the three elements of event planning business. This will involve the acquisition of capital equipment and highly proficient human resource to increase its operating efficiency and thus reduce operating costs. This will enable the business to offer low pricing which many new business will not be able to compete with favorably thereby making it hard for them to pose competition on the business.

Cost advantages from proprietary technology

The business will develop learning and innovating culture to explore new ideas that will lead to better quality service while reducing costs as well. This will increase the level of competitiveness of the business thereby increasing the barriers of entry to new firms.

Décor as well will be offered in a range of tastes and preferences, which the customers have not been able to realize due to the monopoly décor market.

Effect of business operations on fixed and variable costs according to the strategy chosen

The projected level of business operations at both the peak and the off-peak season is not expected to bring any meaningful changes to the fixed cost. This is due to the fact that the business has invested on high quality capital that is less likely to deteriorate within a short time and therefore no increase in costs due to inefficiencies. However, the average fixed costs will reduce with increase in the quantity of services sold to clients.

An analysis of different business costs with changes in the quantity of service

Quantity of service offered (Units)	Fixed Cost	Variable Cost	Total cost	Marginal Cost	Price per unit	Total Revenue	Marginal Revenue
10	$30,000	$8,000	$38,000	-	$4,000	$40,000
20	$30,000	$10,000	$40,000	$2,000	$4,000	$80,000	$40,000
30	$30,000	$12,000	$42,000	$2,000	$3,500	$105,000	$25,000
40	$30,000	$15,000	$45,000	$3,000	$3,000	$120,000	$15,000

Assumptions;

Discounts are offered to clients where greater units of service are purchased.

References

Allen, J. (2000). Event planning : the ultimate guide to successful meetings, corporate events, fundraising galas, conferences, conventions, incentives, and other special events. Toronto: John Wiley & Sons.

Fischer, J. O., & Holbach, G. (2011). Cost management in shipbuilding : planning, analysing and controlling product cost in the maritime industry. Koln: GKP Publishing.

McConnell, C. R., Barbiero, T. P., & Brue, S. L. (2005). Microeconomics. Toronto: McGrawhill.

Wessels, W. J. (2000). Economics. New York: Barron's.